Disabled People: Legislation

Lord Ashley of Stoke: asked Her Majesty's Government:
	Whether they have made an assessment of the effectiveness of existing legislation to help disabled people.

Lord McKenzie of Luton: My Lords, my department undertakes regular research on how employers, service providers and others are responding to their duties under the Disability Discrimination Act 1995. In the past year, we have published a research report on organisations' responses to the Act as well as a compliance audit of the disability equality duty, which shows that organisations and public bodies are responding positively to their duties.

Lord Ashley of Stoke: My Lords, I thank my noble friend for that response. Does he recall the Second Reading debate on my Bill on independent living for disabled people? His colleague, the Minister in that debate, said that she welcomed the principles of the Bill, which was warmly applauded by disabled people. They were delighted that it had such a good welcome from the Government.
	Shortly after that, however, the Bill went from this House to the Commons, where the Government did not lift one finger to back it despite what had been said by the Minister's colleague in this House, so the Bill was lost. After all that effort, all those details and all the trouble taken by disabled people, MPs and Peers, the Bill fell. I am not saying that the Government killed the Bill, but they let it die through neglect. It was neglected because there was no government support for it, despite the apparent unanimity in this House.
	If the Government will do that with Bills of this kind, there are real problems. The important thing to recognise now is that if that Bill comes back—as it will, because I am bringing it back in 10 days—the Government should be careful about what they say and do about principles.

Lord McKenzie of Luton: My Lords, I pay tribute to my noble friend for the tireless and passionate way in which he continues to campaign for disabled people. He will be aware that the Government are fully committed to improving the lives of disabled people. We have introduced a comprehensive package of civil rights for disabled people, and are promoting more independent living through, for example, piloting individual budgets.
	The Government support the principles underpinning the Bill to which my noble friend refers, but are concerned that the implementation of all the measures, especially at the pace proposed, would have major cost implications. It would also overlap, to some extent, with what is already under way. My noble friend may be aware that the Office for Disability Issues is about to publish a cross-government independent living strategy at the turn of the year.

Lord Rix: My Lords, have the Government assessed the number of people with a learning disability who are being denied services by their local authority simply because the local authority has changed the eligibility criteria? If they have not made an assessment, are they, in the jargon of the day, minded so to do?

Lord McKenzie of Luton: My Lords, the Government are always minded to review all aspects of their policy. In relation to individuals with learning disabilities, the supporting people programme has, since its inception, spent something like £8.3 billion supporting a number of people with learning disabilities. So far as local government is concerned, I remind the House that government funding has increased by £28.4 million—39 per cent in real terms—since 1997. The Government have now delivered an above-inflation grant increase to local authorities for 10 successive years, so they have been resourced to address these issues.

Lord Pearson of Rannoch: My Lords, is the Minister aware that the Government's laudable promise that family carers of those with severe intellectual impairment should be placed at the heart of decision-making is not yet being met at local level? At government level, the Government are making all the right noises, as did the previous Government, but at local level it is still not happening. Is there anything the Government can do to encourage that?

Lord McKenzie of Luton: My Lords, I am sure there are still challenges to be met to make sure that disabled people face no discrimination or disadvantage. We are addressing the barriers they face in a number of ways in relation to transport, housing and schooling, and it is clear that we must continue to do that and more.

Lord Skelmersdale: My Lords, the leader of another place said in July that the Government intend to publish a draft single equality Bill in the 2007-08 Session of Parliament. Given the proposed abolition of the disability equality duty and the fact that no mention of it was included in the gracious Speech, what is going on?

Lord McKenzie of Luton: My Lords, we remain committed to our manifesto commitment to introduce an equality Act during this Parliament. The noble Lord will be aware that not long ago we issued a consultation paper and are reflecting on the responses. We will formally respond in due course. The commitment was not for there to be an equality Bill in the Queen's Speech this November, but we remain committed to that endeavour.

Lord Addington: My Lords, the Minister seems to have agreed that there is an aspiration to meet much of what was in the original Bill introduced by the noble Lord, Lord Ashley, and that most of what was in that Bill is best practice. He then said that it is too expensive to do it all of a sudden. Can he give us some sort of timescale for when they expect to do it or at least a time when we will have a timescale?

Lord McKenzie of Luton: My Lords, it would be wrong of me to pre-empt the independent living review which is due to report within a few weeks, but, to illustrate the issues that we are addressing and the barriers we are focusing on at the moment, more funding is going into advocacy services, and I have talked about the supporting people programme. So far as housing is concerned, we have abolished means-testing of disabled facilities grants for families with disabled children, and funding has been increased from £57 million in 1997 to £127 million in the current year. In relation to transport, concessionary fares have been extended. There is a lot going on, so we are not formally awaiting the outcome of that review, but it will set down the path for the next five years.

Baroness Finlay of Llandaff: My Lords, has the disability audit given information on the number of—

Lord Soulsby of Swaffham Prior: My Lords, I am grateful to the Minister for his response to the comments of the noble Lord, Lord Ashley. I regret to say that my experience of now being a disabled person now in London is that hotels, clubs and various other places are not meeting the requirements to which he referred. Will the Minister urge his staff to take a much closer look at the facilities for disabled people in public places, which are not working terribly well?

Lord McKenzie of Luton: My Lords, I acknowledge the noble Lord's experience and I am sorry that he is still suffering the challenges he has outlined. Research increasingly shows that employers, companies and public services are aware of their responsibilities, but there is clearly a considerable way to go.

Children: Criminal Responsibility

Baroness Miller of Chilthorne Domer: asked Her Majesty's Government:
	What plans they have to review the effect of the reduction in 1998 of the age of criminal responsibility to 10 years old.

Lord Hunt of Kings Heath: My Lords, there are currently no plans to review the effect of the changes to the criminal responsibility rules introduced by the Crime and Disorder Act 1998.

Baroness Butler-Sloss: My Lords, is the Minister—

Baroness Miller of Chilthorne Domer: My Lords, I thank the Minister for his Answer, although it is very disappointing. Does he think that there is any correlation between the fact that in this country we have the lowest age of criminal responsibility in western Europe and a higher number of children in prison than in all those other countries put together? Will he undertake a study of how those other western European countries deal with offending behaviour among their child populations?

Lord Hunt of Kings Heath: My Lords, it is very difficult to make crude comparisons between different countries with different systems. I accept that we should look constantly at the experience of other countries to see what we can learn from them. Equally, I hope that other countries will look at the experience of the UK. The overall philosophy adopted is that early intervention allows for action to be taken to prevent reoffending in the future. It is very important that action to prevent reoffending is seen as a major priority.

Baroness Butler-Sloss: My Lords, I apologise to the noble Baroness, Lady Miller, for interrupting her supplementary question; I am sorry to have done so. I am afraid it was over-enthusiasm.
	Are the Government considering any plans for the diversion of children who are offenders between the ages of 10 and 12? If so, what are they considering?

Lord Hunt of Kings Heath: My Lords, I am grateful to the noble and learned Baroness for her comment. The Government's intention is to ensure that custodial sentences should be a last resort. We want to ensure that young people who come within the criminal justice system are dealt with as effectively as possible, with the emphasis on rehabilitation and the prevention of reoffending. In order to reduce the number of children being taken to court for relatively low-level offences, the introduction of youth conditional cautions is provided for in the Criminal Justice Bill which is currently being debated in another place. We also support other initiatives.

The Lord Bishop of London: My Lords, in the light of that answer, the Minister is obviously aware that in 2005 76 per cent of children given custodial sentences reoffended within 12 months of their release. Does he agree that the other initiatives to which he referred are very urgent indeed in view of these figures?

Lord Hunt of Kings Heath: My Lords, the figures given by the right reverend Prelate are right and clearly are very serious. It shows that the earlier the intervention, the more likely one is to prevent reoffending. This is why we are looking at a number of areas where early intervention can take place before a young person is taken in front of the full criminal justice system. However, it is also likely, is it not, that the young people who end up in custody are likely to be the most hardened offenders? One has to be very cautious about drawing too many conclusions from the figures.

Lord Thomas of Gresford: My Lords—

Lord Mackenzie of Framwellgate: My Lords, does my noble friend agree that there is a public interest in this issue and that we have seen recently that youngsters between 10 and 14 can be guilty of the most horrific offences or "crimes"? It is important that we publicly call them to account. We should perhaps not punish them, but we should certainly treat them as the Minister suggested. Would the public not be outraged if these matters were dealt with behind closed doors?

Lord Hunt of Kings Heath: My Lords, I am sure that my noble friend is right to draw attention to the public's interest in these matters. I am sure also that young children in the category about which we are speaking understand the difference between naughtiness and action that is seriously wrong. That was the basis of the change in 1998. Equally, as I have said already, we have to ensure that early interventions are focused on the prevention of reoffending.

Lord Thomas of Gresford: My Lords—

Lord Elystan-Morgan: My Lords,

Baroness Ashton of Upholland: My Lords, it is the turn of the Liberal Benches.

Lord Thomas of Gresford: My Lords, have the Government considered the findings of the Scottish Law Commission in 2002 that the criminal justice system as a whole is inappropriate for dealing with young children, that there should be an absolute bar on prosecution of children under the age of 12 and that the vast majority of cases should be dealt with by a welfare-based system of children's panel hearings which addresses the child's behaviour with the co-operation of the parents? Is not the use of the criminal courts in England and Wales to deal with 10 year-olds an abuse not even contemplated in the dark ages?

Lord Hunt of Kings Heath: No, my Lords, I strongly refute that suggestion. I am quite clear that young people even at that age understand the difference between right and wrong. It is appropriate that young people are dealt with in the criminal justice system as they are in this country, but the emphasis is always on rehabilitation and prevention of reoffending. That has to be the first priority.

Lord Elystan-Morgan: My Lords—

Baroness Ashton of Upholland: My Lords, we should move to the next Question, and as it is mine, I am particularly keen to get on to it.

EU: Reform Treaty

Lord Elton: My Lords, following the enthusiasm of the Leader of the House, I beg leave to answer, or rather ask, the Question standing in my name on the Order Paper.
	The Question was as follows:
	To ask Her Majesty's Government whether Parliament will be able to amend the new European Union Treaty.

Baroness Ashton of Upholland: My Lords, if the noble Lord wishes to answer it, too, that will be fine. The Government will publish a Bill setting out the way in which the treaty will be given effect in UK law. Parliament can vote to amend the Bill, although some of its provisions will be necessary for the UK to ratify the treaty. Parliament cannot unilaterally amend the treaty, which in this case will have 26 other signatories beside the UK.

Lord Elton: My Lords, does it not follow that the function of the debate on the Bill, which cannot alter jot or tittle in the treaty, is to inform the general public about the Bill's contents? When the public are informed, will they not then be in a position to come to their own conclusion about its desirability by means of a referendum?

Baroness Ashton of Upholland: My Lords, the noble Lord knows very well that the Government do not support a referendum in these circumstances. We are following the long established good practice that the amendment of a treaty of this kind should be handled by your Lordships' House and another place. That is what we intend to do.

Lord Tomlinson: My Lords, does my noble friend agree that the persuasive logic of the noble Lord's Question is that we should allow plenty of time for debate of the Bill in this Chamber and then, when we have analysed it exhaustively, there should be no need for anybody at that stage to want to amend it?

Baroness Ashton of Upholland: My Lords, I have no doubt that our debates will be exhaustive, and possibly exhausting, and that noble Lords will want to spend time ensuring that they understand completely what is in the reform treaty and the red lines that the UK Government have been able to achieve.

Lord Dykes: My Lords, does the Leader of the House agree that the Eurosceptics do not need to worry about this provided there is the substantial discussion referred to earlier on, because 18 plus seven countries have now improved the original text? According to Mr Tony Blair, that was indispensable to this country. They have modernised and shortened it, and have agreed everything that the sovereign member states wanted. They are happy to let the Commission powers be expressed in that way.

Baroness Ashton of Upholland: My Lords, in looking at what has happened to the reform treaty, it is important that we are clear about the difference between the Constitution and the reform treaty. Noble Lords will wish to spend time looking at that. But I am also clear that the role of Parliament is to take the ratification through the necessary process—to spend time debating and discussing it—in order for Parliament to reach its conclusion.

Lord Mackay of Clashfern: My Lords, what would happen if the provisions of the Bill, which the Leader of the House said were essential for the treaty to come into force in the UK, were negatived by Parliament?

Baroness Ashton of Upholland: My Lords, the UK would not then have ratified the treaty.

Lord Anderson of Swansea: My Lords, surely the real challenge is to ensure that there is as much parliamentary involvement as possible, not only over this treaty but in future treaties. Is not one important component of the Bill that there will be a much greater role for national parliaments in respect of European matters?

Baroness Ashton of Upholland: My Lords, indeed, it is interesting to see the proposals coming forward for the UK and parliaments of all the 27 nations to have the opportunity to look at proposals in the context of subsidiarity and be sure that those proposals do not adversely affect the system that we have in place.

Lord Campbell of Alloway: My Lords—

Lord Redesdale: My Lords—

Lord Grocott: My Lords, the arithmetic is simple: we have had two Conservative, two Labour and one Liberal speaker, so it is the turn of the Liberals.

Lord Redesdale: My Lords, we win on numbers. Will the Leader of the House read the proceedings that took place in this House during the referendum debate on the Maastricht treaty, in which the largest vote ever to take place in this House was overwhelmingly against a referendum? The leadership of the main opposition party led the charge through those Division Lobbies.

Baroness Ashton of Upholland: My Lords, enough said.

Lord Howell of Guildford: My Lords, will the Leader of the House at least assure us that any attempt to amend the treaty in the future by the so-called self-amending clause—Clause 33(3)—will be exposed to proper national parliamentary control and not just pushed through without any parliamentary intervention at all?

Baroness Ashton of Upholland: My Lords, my right honourable friend the Prime Minister has been clear in the statements that he has made. We will debate elements of this before the Council—we will have a debate in your Lordships' House and another place—to look at exactly how we take forward any future proposals. My right honourable friend has been very clear that he sees this as a process in which we have now made the necessary amendments. As noble Lords will be aware, he is very keen that the European Union now concentrates on its role economically in terms of what it does for social justice and so forth and its role in the global economy.

Lord Campbell of Alloway: My Lords—

Lord Wedderburn of Charlton: My Lords—

Lord Grocott: My Lords, it is now Labour's turn.

Lord Wedderburn of Charlton: My Lords, I have a simple question for my noble friend. When will an authoritative English text of the treaty be provided to Members of the House?

Baroness Ashton of Upholland: My Lords, I believe that the texts are being worked on at the present time. The noble Lord, Lord Grenfell, has asked us to put the texts before the EU Committee for information. That will be done very soon. I cannot say exactly when, but I am told that it will be very soon.

Lord Pearson of Rannoch: My Lords—

Lord Campbell of Alloway: My Lords,

Noble Lords: Campbell!

Lord Campbell of Alloway: My Lords, this is a very short question. Is the noble Baroness aware that debates in either House of Parliament and assurances given by this Government or any Ministers about what will happen on ratification of the treaty are matters within the sole competence of the European Court of Justice?

Baroness Ashton of Upholland: My Lords, I am sure that one aspect of our debates as we bring forward the reform treaty and of debates in your Lordships' House will be the role of the European Court of Justice. I very much look forward to those debates. Noble Lords who have had, as I have, the privilege of reading the deliberations of the Select Committee in another place will know that this is one issue that is relevant and important and worthy of greater debate.

Lord Pearson of Rannoch: My Lords—

Dyslexia

Lord Addington: asked Her Majesty's Government:
	What assessment they have made of recent reports claiming to have found a new solution to dyslexia.

Lord Adonis: My Lords, we are aware of a range of approaches to teaching children with dyslexia. It is for schools and local authorities to decide which approach they use. The British Dyslexia Association has not, as yet, accredited the approach recently reported in the newspapers, but we are working with dyslexia organisations through the new "No to Failure" project, which is piloting and evaluating the impact of providing specialist dyslexia training to teachers, and specialist tuition to children with dyslexia.

Lord Addington: My Lords, I thank the Minister for that response. Can he also tell us what coping strategies are being built into the new plans for the teaching of young adults, and for those who are staying on later at school? As he is undoubtedly aware, many people have been missed in identification and support in their early years. How are we to structure it so that we do not reinforce that type of failure in extra schooling?

Lord Adonis: My Lords, the further education sector is under a duty to see that its institutions properly address special learning difficulties. For young people making the transition from schools to further education institutions, or wanting to access their services, that provision should be put in place by the appropriate authorities.

Lord Walton of Detchant: My Lords, does the Minister accept that dyslexia is one of a group of developmental disorders of variable severity that may occur in people of otherwise perfectly normal, or even higher than normal, intelligence? Amusia refers to those who are tone deaf and dyspraxia to those who are inherently extremely clumsy but, of all such conditions, dyslexia is the most easily recognised and characterised disorder. Is the Minister aware of the research work being done by Professor Stein and his colleagues in Oxford? It seems to suggest a new method, contrary to the traditional technique of intensive individual learning to overcome that deficit, which is well worth further exploration.

Lord Adonis: My Lords, there is a wide range of approaches for tackling dyslexia among young and older children. The key is to ensure that there are properly trained teachers who can undertake screening, so that issues are addressed as soon as possible after children start school. That is why we are investing significantly in teacher training in this area, including introducing new modules into initial teacher training; we are piloting that at the moment. As the noble Lord rightly says, if this issue is addressed we can realise young people's full potential in education.

Baroness Morris of Bolton: My Lords, as someone who is dyslexic I particularly liked the fact that noble Lord, Lord Walton of Detchant, said that we are of higher than normal intelligence.
	Does the Minister think that Ofsted has the knowledge and expertise to assess schools for dyslexia teaching, as it often seems to fail in picking up support for dyslexic children and young people?

Lord Adonis: My Lords, I am well aware of the superior intelligence of the noble Baroness as she interrogates me across the Table. As she rightly says, many people with dyslexia go on to perform extremely highly. It is essential that the education system picks up their particular problems and addresses them. As she knows, Ofsted conducts inspections of individual schools but is not able to go into that level of detail with them. However, schools are expected to complete self-evaluation assessments and part of the self-evaluation form that schools complete concerns their ability to address special educational needs.
	We are also improving the training for special educational needs co-ordinators, who must be present in each school. Training for new co-ordinators will be mandatory from next year. Part of their role is to see that proper provision is in place, including the screening of children for special educational needs when they arrive in school.

Lord Redesdale: My Lords, what steps are being taken to increase the quality of teaching, in terms of teachers and education, among prisoners? There is a high level of dyslexia among the prison population.

Lord Adonis: My Lords, the noble Lord is absolutely right that that is a huge issue inside prisons. That is why we have considerably expanded resources for prison education, responsibility for which has moved to my department so that the issue is given a special education focus and is not seen as part of the normal criminal justice system.

Baroness Sharples: My Lords, I understand that 27 per cent of young people going into education have English as their second language. How many of those 27 per cent have problems with dyslexia?

Lord Adonis: My Lords, I shall write to the noble Baroness to give her the latest information that we have on this issue. I am not aware that dyslexia rates are significantly higher among ethnic minority communities, but I shall see that the noble Baroness gets the full statistics available.

Lord Avebury: My Lords, has the Minister seen the research by Professor Karen Bryan of the University of Surrey, which shows that a large proportion of the speech, language and communication difficulties experienced by children and adults in prison have previously been undetected? Will he therefore reassure us that adequate resources will go into the identification of people with those difficulties as they enter the prison system?

Lord Adonis: My Lords, the noble Lord is completely right that too many of the learning difficulties experienced by those in youth offending and adult prisons have not been properly identified in schools. The resources that we put into special educational needs in schools have significantly increased. Local authorities' planned spending on special educational needs has risen by £2 billion since 2000-01 and now stands at £4.9 billion. So the Government are investing very significantly in this area, but I would be the first to accept that we have further to go.

Lord Roberts of Llandudno: My Lords, may I revisit something raised previously? What mechanisms are there to ensure that new advances and suggestions in England are also acted upon or able to be discussed, at least, in Scotland, Wales and Northern Ireland, in the devolved educational settlement?

Lord Adonis: My Lords, officials in my department and the research communities on which we rely interact very closely with our counterparts in Scotland and Wales. On the issue of dyslexia, for example, we have worked closely with Scottish universities, which, led by the University of Aberdeen, have adopted new approaches to training teachers in addressing dyslexia. Our teacher-training institutions in England have paid very close attention to work in Scotland in that regard. So there is close co-operation.

Lord Brennan

Baroness Hayman: My Lords, before we proceed to further business, may I say a word in tribute to the highly professional and effective response to the medical emergency in the Chamber last night? I think that the whole House would wish to express its gratitude to the members of staff and Members of your Lordships' House who responded so effectively yesterday evening and wish the noble Lord, Lord Brennan, a full and speedy recovery.

Business

Lord Grocott: My Lords, with permission, I have one or two items of business. The first follows on from the statement just made by the Lord Speaker. As we adjourned the debate yesterday, I want to ensure that all noble Lords are aware of the fact that we shall resume the debate on the Second Reading of the embryology Bill tomorrow, as first business, and complete the speakers' list, which was not completed yesterday.
	It is nice to be able to tell the House that I met members of the family of my noble friend Lord Brennan this morning and they say—I use their words, not mine—that he is "absolutely fine". That is very nice to be able to report.
	We shall have a Statement later today on HM Revenue and Customs, which will be repeated by my noble friend Lord Davies of Oldham. We shall take it after the contribution by my noble friend Lord Rosser to the Local Transport Bill—that is, after the fifth speaker.
	I have one final piece of advice—as noble Lords know, it can only be advice. The Statement sets things back a little with regard to timing, but if the Back-Bench speakers on the Local Transport Bill observe a limit of 12 minutes we shall reach the debate on the Pre-Budget Report—a very important debate—at a reasonable time this evening. We recommend 12 minutes.

Joint Committee on Consolidation etc. Bills

Personal Bills Committee

Privileges Committee

Standing Orders (Private Bills) Committee

Lord Brabazon of Tara: My Lords, I beg to move the four Motions standing in my name on the Order Paper.
	Consolidation etc. Bills
	Moved, in accordance with Standing Order 52, that, as proposed by the Committee of Selection, the following Lords be appointed to join with a committee of the Commons as the Joint Committee on Consolidation etc. Bills:
	L ActonV BledisloeL Campbell of AllowayL ChristopherV Colville of CulrossE DundeeB FookesL Janner of BraunstoneB MallalieuL MethuenL RazzallL Rodger of Earlsferry (Chairman).
	Personal Bills
	Moved, that a Select Committee be appointed to consider personal Bills and that, as proposed by the Committee of Selection, the following members together with the Chairman of Committees be appointed to the committee:
	V Allenby of MegiddoL GeddesL GreavesV SimonL Slynn of HadleyL Templeman.
	Privileges
	Moved, that a Committee for Privileges be appointed and that, as proposed by the Committee of Selection, the following members together with the Chairman of Committees and any four Lords of Appeal be appointed to the committee:
	B Ashton of Upholland (Lord President)B Anelay of St JohnsL Brooke of Sutton MandevilleB D'SouzaL Eames L Graham of EdmontonL GrocottL Howe of AberavonL Mackay of ClashfernL McNallyL MarshL Shutt of GreetlandL StrabolgiL StrathclydeL Woolf;
	That the committee have power to appoint sub-committees and that the sub-committees have power to appoint their own chairmen;
	That the committee have power to co-opt any member to serve on a sub-committee.
	Standing Orders (Private Bills)
	Moved, that a Select Committee on the Standing Orders relating to private Bills be appointed and that, as proposed by the Committee of Selection, the following members together with the Chairman of Committees be appointed to the committee:
	L GeddesB Gould of PotternewtonL LukeL NasebyL PalmerV SimonB Thomas of Walliswood.—(The Chairman of Committees.)

On Question, Motions agreed to.

Local Transport Bill [HL]

Lord Bassam of Brighton: My Lords, I beg to move that this Bill be now read a second time. The Local Transport Bill is an important part of the Government's strategy to improve public transport and tackle congestion. This is a very significant piece of legislation: local transport matters to millions of people in their everyday lives; an efficient transport system lies at the heart of a productive economy; and our local transport choices also affect our environment.
	Before I get into the main body of my text, I would like to record my thanks to all noble Lords who have taken part in briefing sessions over the past week. I also thank the many organisations which kindly circulated briefing documents on the Bill—they have been unusually helpful and they suggest that we will have very constructive debates today, in Committee, on Report and at Third Reading. I pay particular tribute to the RNIB, the LGA, the Countryside Alliance, Help the Aged, the CBI and National Rail, which very kindly circulated their thoughts and comments—most of them positive—on the content and progress of the Bill so far.
	Bus services are a key part of our local transportation system. More than 4 billion bus journeys are made each year, or two-thirds of all journeys by public transport. They play a key role in connecting people to essential goods and services, to jobs, to leisure, and to friends and family.
	The Government are therefore investing substantially in local bus services: government spending on buses is expected to reach some £2.5 billion this year, up from around £1 billion a decade ago. The Concessionary Bus Travel Act, which received Royal Assent earlier this year, will guarantee free off-peak bus travel for older and disabled people throughout England from April 2008. As a result of these and other steps, we have at last seen the long-run historic decline in bus patronage level off in recent years, but we still need to do more.
	The Bill includes various proposals aimed at delivering bus services that are more closely aligned to passenger needs, building on the lessons learnt from an extensive review of bus policy led by Ministers and officials in the Department for Transport. It is clear that in certain parts of the country bus services are improving and patronage is rising. But in too many places these successes are not being replicated, patronage remains on a downward trend, and services risk falling into a spiral of decline.
	More often than not, successful outcomes have been delivered through strong voluntary partnerships that have been forged between local authorities and bus operators. But some authorities and operators have found themselves constrained in what they can achieve under existing competition law. What becomes a particular concern for some local authorities is when they wish to enter into discussions with more than one bus operator.
	The Bill therefore includes a revised competition test for these voluntary partnership agreements, specifically designed to give greater clarity and certainty to participants. It also removes the threat of financial penalties where the Office of Fair Trading finds that an agreement, although entered into in good faith with a local authority, breaches competition law. These measures should increase the potential for voluntary partnership agreements to be entered into, particularly in areas where there is more than one incumbent operator.
	The Bill would also strengthen the framework, established in the Transport Act 2000, for quality partnership schemes. It would remove existing restrictions, so as to allow these schemes to include provisions about frequencies, timings and maximum fares—things that matter a great deal to passengers—while stopping short of enabling authorities to impose unreasonable requirements on operators. It will enable facilities and standards of service in a quality partnership scheme to be phased in over a period of time, and also includes measures to help prevent quality partnership schemes being undermined by destabilising competition from operators who are not participating in the scheme.
	The Government recognise that partnership arrangements will not work everywhere. In some circumstances, it may be in the public interest for local authorities to take greater control over local bus services. The Transport Act 2000 included provisions for local transport authorities to make quality contracts schemes—essentially the London-style model of bus franchising. The Bill sets out a series of public interest criteria which would need to be met in place of the existing "only practicable way" test that has proved too high a hurdle in practice. The intention is to ensure that quality contracts schemes are a realistic option where they are in the public interest.
	Punctuality and reliability also matter a great deal to passengers, and traffic commissioners have an important role to play in monitoring performance and taking action where services are not operated as registered. The Bill would strengthen the traffic commissioners' role in a number of important ways. First, it would enable local authorities, as well as bus operators, to be held to account for their contribution to punctuality performance. In some cases, action—or inaction—by the local authority can be a contributor to poor bus punctuality through, for example, poorly planned roadworks or inadequate enforcement of bus lanes. Secondly, it would allow the traffic commissioners to impose a broader range of penalties where bus operators demonstrably failed to provide a punctual service. The Bill would allow the traffic commissioners to order an operator to invest a given sum, equivalent to the fine that would otherwise be imposed, in improving services or compensating passengers. That will preserve a clear financial incentive for operators to maintain good performance, while allowing financial penalties to be applied in a way that benefits passengers.
	The Bill also includes provisions to modernise the traffic commissioner system, through the appointment of a senior traffic commissioner with statutory powers to issue general directions and guidance to other commissioners. That would help to ensure consistency of approach across the traffic commissioner network. The Bill would also provide for greater flexibility in the deployment of traffic commissioners, and would make them more accountable for their work and the way in which they carry out their duties.
	The Government believe that there is also a need to give bus passengers a stronger voice. In the rail sector, the Rail Passengers' Council provides a high-profile commentary on the performance of the industry and handles individual complaints. Although a number of non-statutory bodies represent the interests of bus passengers, often at a local level, responses to the consultation on the draft Bill indicated broad support for the principle of stronger passenger representation. The Bill would therefore pave the way for the introduction of a more prominent and influential voice for the bus passenger—a statutory body with a strong public role in promoting the interests of passengers across the country.
	The community transport sector plays an important role in the provision of transport services where there is insufficient demand to sustain a conventional bus service. The Bill will relax existing constraints on the size of vehicles that may be used by operators under community transport permits, and will allow drivers on local services provided under Section 22 permits to be paid. In response to the views of the community transport sector, the Bill now retains the existing system whereby Section 19 community transport permits may be issued by designated bodies. It also includes measures to strengthen the permit system for all community transport permits.
	The strengthened powers for local authorities to improve bus services in their areas will be most effective if they are supported by the right arrangements for taking decisions at a local level. There is a clear consensus that, in our larger urban areas outside London, the current leadership and delivery arrangements for transport do not work as well as they might, and need to be updated to reflect changing patterns of transport. The barriers to effective transport planning and delivery in these areas include: the lack of a single focus for leadership of city-region transport; the difficulties in co-ordinating different transport modes, particularly given the split between passenger transport authorities and metropolitan district council responsibilities for public transport and roads; and the complex and sometimes unwieldy structure and membership of passenger transport authorities and executives.
	The Bill would enable local areas to review their existing local transport governance arrangements, and to develop proposals for reform. In contrast to previous legislation in this area, the Bill does not take a prescriptive approach. Instead, it would allow individual areas to develop their own proposals, taking account of their particular local needs and circumstances. Following a locally led review, the Secretary of State would have the power to bring forward secondary legislation covering a variety of matters, including the existing transport responsibilities of passenger transport authorities and executives, metropolitan district councils and the Secretary of State.
	The Bill would also enable secondary legislation to cover the establishment of new passenger transport authorities—or integrated transport authorities, as they would in future be called. It would enable the boundaries of existing integrated transport authorities to be changed; for example, to reflect the changing patterns of travel since they were first established.
	Rising congestion on our roads is a consequence of a strong, vibrant and growing economy. However, congestion could have a significant impact on our future prosperity, environment and quality of life. Sir Rod Eddington, in his study into the links between transport and the economy, said that without further action there will be a 30 per cent increase in congestion on our roads by 2025. It is for that reason that the Government are encouraging local authorities to bring forward local road pricing schemes to tackle local congestion problems, as part of a wider package of measures. We have taken no decisions on whether to move towards a national road pricing scheme, but we can learn from the development of local schemes.
	The Greater London Authority Act 1999 and the Transport Act 2000 established the legal framework for local road pricing schemes in England and Wales. Those Acts provide the basis of the existing pricing schemes in London and Durham. The Bill includes proposals to update that existing legal framework. It would place decision-making clearly at the local level by removing the existing requirement for schemes to be approved by the Secretary of State. It also provides that the net proceeds of all schemes are retained by the local authority and must be applied to local transport for the lifetime of the scheme. It also contains provision to help ensure that any schemes are consistent and interoperable to avoid unnecessary complexity for road users.
	The Bill would confer a new framework power on the National Assembly for Wales consistent with the devolution arrangements under the Government of Wales Act 2006. That would enable the Assembly to make provision for the making, operation and enforcement of pricing schemes in respect of trunk roads in Wales. The provision has been included in the Bill specifically at the request of the Welsh Assembly Government, who wish to have the powers available that would allow them to adopt a coherent approach towards any proposals within Wales or any future national scheme. It will be for the Assembly to consider whether—and, if so, how—it would be appropriate to exercise those powers.
	The Bill also includes a provision to allow the Driver and Vehicle Licensing Agency to retrieve data from its foreign counterparts, linking foreign vehicle registration numbers to their registered keepers, and to disclose that data to local authorities and other bodies. That will help in particular with the enforcement of local road pricing schemes and parking and moving-traffic offences.
	The Bill would extend significant powers to local authorities to deliver transport that better met the needs of their local communities. It has already benefited from a full public consultation, based on a draft version of the Bill published in May, and from extensive pre-legislative scrutiny in another place. We are grateful to all those who have contributed to that process, because the Bill has, in our view, been improved in a number of respects as a result, and has been widely welcomed by local authorities, transport providers, transport users and others. I look forward to today's debate and I commend the Bill to the House.
	Moved, That the Bill be now read a second time.—(Lord Bassam of Brighton.)

Earl Attlee: My Lords, I am grateful to the Minister for his detailed and careful explanation of the Bill. The Bill has indeed had the benefit of proper consultation and pre-legislative scrutiny, and it now falls to your Lordships to start the formal parliamentary process today. As the Minister explained, the intention of the Bill is to reinvigorate local transport arrangements. I am sure that all noble Lords will recognise and accept the need for change.
	As I see it, the Bill proposes change in three main areas. First, it seeks to improve local bus services, whose patronage has in the main remained stubbornly low outside London despite the increased usage of other forms of transport. Secondly, the Bill seeks to address some of the historic anomalies in the UK's transport governance arrangements, which have too often proven an inflexible hindrance rather than a help. Finally, and perhaps most controversially, the Bill seeks to bring forward local road pricing schemes. I will turn to each topic in turn.
	The Minister sought to place the Bill in the proper context of the Government's overarching transport strategy: to reduce congestion and to improve public transport. Those are laudable aims, especially considering the cost implications and the frustration caused by congestion, which shows no sign of abating. Indeed, it is worth remembering that total car traffic has increased by 850 per cent since 1955. I can remember when I used to park my car in Barnet High Street in order to go to the café—how things have changed now. Unfortunately, the Bill lacks the vision required for such revolutionary speak. What is needed is a holistic approach to the whole issue of congestion and public transport, with attention paid to all the constituent causal elements, rather than just to those that the Bill seeks to address. The Bill is a mere tweaking at the edges and will not serve the Government well in the long run.
	It is clear that the existing arrangements for buses have room for improvement. Bus patronage is declining in many areas and shows little sign of improving without a dose of good management and effective legislation. Agreements between authorities and operators to devise services and timetables with the reasonable aim of providing a better service to the public can sometimes be viewed as collusion rather than co-operation. It is evident that full advantage of the provisions of the Transport Act 2000 has not been taken. The Bill seeks to make it easier for local authorities to draw up partnerships and contracts with bus operators, as explained by the Minister.
	I am not confident that quality contracts are necessary for an effective local transport system. The lowering of the bar for the introduction of such schemes through proportionality criteria, as the Bill proposes, interferes with the market and risks allowing regulation by the back door. Harmonious working relationships ought to be available without franchising and a partnership approach should suffice. We will be pressing this view in Committee. Even if quality contracts were desirable, local authorities could be discouraged by the significant resources inevitably required to demonstrate and meet all of the new public interest criteria, both when setting up new arrangements and, subsequently, during potential appeals from operators. There is a lack of precedent for the quality contracts. I understand that no local authority has changed its arrangements since the Transport Act 2000. Perhaps that situation will persist.
	The proposals to improve both voluntary and quality partnerships are rather more promising and worthy of development. They seek to allow authorities greater powers to enhance partnerships. We will be aiming to refine the proposals to ensure that partnerships are fair, genuine and balanced for all. Your Lordships will want to clarify the definition of "admissible objections" from bus operators, which is a bit ill defined at present. However, the real and perceived restrictions imposed by the Competition Act, which will discourage the proposed multi-operator voluntary partnership agreements, undermine the need for change. If a scheme is evidently in the public interest, common sense should prevail. Only then will partnerships have the desired result.
	Punctuality is one of the public's main criteria in assessing the utility of their bus service; the Bill's acknowledgement of this is welcome. Proposals for local authorities to share the responsibility with operators are fair. However, the use of traffic commissioners for this purpose will require further consideration.
	The existing local governance arrangements for transport in the UK need reform. That is particularly so in large PTA-governed urban areas outside London. The arrangements in those areas are outdated and do not make much sense. The inflexibility of current legislation prevents rational changes to reflect modern patterns of transport needs. It is right that local areas should be able to decide on the most appropriate governance arrangements for themselves. The bottom-up reforms proposed to allow improved governance are welcome. It is crucial, however, that these changes arise from local action as intended. In addition to allowing local areas to initiate a review of their governance arrangements, the Bill retains the ability for the Secretary of State to do so. We need to avoid situations where this direction becomes unnecessary interference. If change is to be effective, that must not happen. Local authorities need to be partners in the recognition and implementation of change.
	The Bill also makes changes to the traffic commissioner structure. While not as prescriptive as the draft Bill proposed, the Bill expands the role of traffic commissioners. In Committee, we shall seek to ensure that the proposed structure and role of the traffic commissioner is appropriate and does not become another layer of bureaucracy, while still achieving the objective that we all desire.
	Perhaps the most controversial proposals concern local road pricing schemes. As the Minister explained, the proposal is to make the introduction of local road pricing schemes easier, removing the requirement of approval from the Secretary of State and ostensibly putting the power of decision into the local domain. Why? National road charging schemes have been shelved and the Bill does not make provision for the introduction of such a scheme. That has been made clear many times. The removal of the Secretary of State's approval for local schemes could, perhaps, be viewed as distancing central government from potentially controversial decisions, while leaving local authorities to gauge the acceptability of charging schemes. That is hardly leading from the front. The use of the Transport Innovation Fund, seemingly to encourage and to coerce local authorities to adopt road pricing schemes, demonstrates that all too often devolution is accompanied by terms and conditions given from the centre.
	My noble friend Lord Glentoran, who speaks for Welsh affairs on these Benches, will be making important observations about the Welsh provisions with regard to road pricing and my noble friend Lord Roberts of Conwy will be adding his own perspective. I will not steal their thunder, but I recommend that the Minister listens to them with great care.
	The removal of the absolute requirement to consult the public before introducing a scheme, as the Bill proposes, is unacceptable. The opacity that this could bring undermines the advantage of holding such decisions locally, and public support is paramount if a scheme is to be successfully introduced. Polling shows that the primary concern of British motorists appears to be the cost of motoring, and the public will not support a scheme—local or otherwise—that serves to increase significantly the cost of motoring and bring about another stealth tax. As no reference is made in the Bill to the reduction of other taxes or charges, the public cannot be assured of that at present. This is especially true in the proposals for Wales, as my noble friends will explain. Additionally, the use of pricing to bring benefits with regards to climate change is given the briefest of mentions, and should be expanded on if the Bill is serious about this issue rather than using it as an afterthought.
	The Bill makes a welcome attempt at resolving the very real problem of collecting charges from foreign registered vehicles. That issue will become more apparent should local pricing schemes become widespread, and we will seek to investigate how best to refine the proposals to ensure it becomes a reality. However, as it has been demonstrated that the DVLA estimates that its records for UK drivers are only 81.5 per cent accurate, more attention needs to be given to this concern if road pricing of any sort is to be introduced successfully.
	In conclusion, I believe that the objectives of the Bill are reasonably clear and agreed. I look forward to hearing your Lordships' views on how the proposals contained within the Bill can be refined for the benefit of passengers, car drivers and the wider economy.

Lord Bradshaw: My Lords, like the noble Earl, I pay tribute to the Minister, to the Minister in another place and to officials, who have been very patient. There has been a lot of consultation and pre-legislative scrutiny. We have a fairly clear understanding of what the Bill is about. My noble friend Lady Scott of Needham Market will address the issues of governance, because many of them are important, and my noble friend Lord Mar and Kellie will talk about the effects on the devolved administrations.
	I want to talk first about congestion, because it is by far the worst enemy of the bus. A number of seminal papers on the subject have shown that congestion is a self-exciting phenomenon—which means that as it gets worse, it gets even worse. Something has got to be done to break the deadlock in our cities; otherwise they will grind to a halt. That is why I am particularly pleased that, regarding inquiring into the poor quality of bus services, local authorities will be asked—in fact, required—to appear before the traffic commissioners to give an account of their stewardship of the roads, a power conferred by the Traffic Management Act 2004. I am pleased that the traffic commissioners are to be reinvigorated. I would ask the Minister to give particular account to the status of the people who will be appointed to these jobs, which have to be of sufficient status to attract people of quality. They should not be part-time jobs that you can do after you have retired from the Army. You should need some background in the industry to be able to do the job properly.
	In particular, the traffic commissioners' powers over registration of services need to be fairly wide, a point made by the noble Earl, Lord Attlee. At the moment, traffic commissioners have no power whatever to reject a registration made under the 1985 Act. They should exercise some judgment as to what is in the public interest. If one person operates a service on the hour and someone else registers a service at 55 minutes past the hour there will be no buses for the next 55 minutes. That is clearly not in the public interest. We want the public interest to become the paramount consideration.
	On local transport plans, Clause 8 states that local transport authorities should "take into account" the directions of the Government on environmental matters. I would like to think that that could be slightly rephrased to take into account "as a minimum" the Government's guidance on environmental matters, because I believe—and the Prime Minister acknowledged this yesterday—that environmental targets will be raised substantially. I am sure that local authorities involved in this will have to work with those increased standards.
	I am very interested in the question of highway powers. Who is going to exercise them? Will the integrated transport authorities do it? Will authorities with highway powers, such as county councils which have responsibility both for the bus service and the highway, do it? What happens in a place where there is an integrated transport authority but two districts decide that they do not want the bus lanes, integrated traffic lights or enforcement? In those circumstances, will two of the constituent authorities be able to vitiate the policies advanced by the integrated transport authority? Will the consent of constituent councils be required? That is particularly important in any road pricing scheme. It would be nonsense to have a 10-district area where two of the districts decided that they did not want to be part of the road pricing scheme. In fact, that would torpedo the whole scheme.
	Like the noble Earl, Lord Atlee, I want to know what admissible objections to quality partnerships are. I would not want bus operators, or anybody else, to have a veto over a quality partnership. Their objections must be considered but they should not be in a position to undermine what there is general consensus to achieve. While we are getting clarification in describing quality contracts—which I think are going to be difficult to achieve—the meaning of the words "economic, efficient and effective" in Clause 18 needs to be spelt out. How is somebody going to judge whether a scheme is economic, effective and efficient?
	The Bill refers to an approvals board chaired by a traffic commissioner. Who constitutes the board? Is it an employer or a trade unionist, or is it somebody who has some expertise in the subject? The material put before them will be very technical and it needs to be judged by people with technical knowledge, as well the traffic commissioner who we assume is competent in such things.
	The competition test is extremely important. I can single it out as one thing in the 1985 Act and the Competition Act 1998 that is necessary. I could quote from my own knowledge, but I am quoting from the brief from the Campaign for Better Transport:
	"We commissioned an opinion from John Swift QC (a pre-eminent authority on competition law) ... on the exercise of powers under the Competition Act with respect to the bus industry. They concluded that the revised schedule 10 criteria could be applied to all agreements between operators, rather than ... those involving local authorities".
	Outside quality contracts, if a number of bus operators—two or three—get together and bring forward proposals which may involve recognising one another's tickets—it is one of the biggest annoyances to passengers when they do not—or combining their timetables to provide a better service, somebody ought to be able to say that it is in the public interest to accept that and it should be exempt from inquiries by the Office of Fair Trading.
	I know that the noble Lord, Lord Cameron of Dillington, will speak about services in country areas. I cannot understand why there is a distinction between Section 19 and Section 22 services. Parish councils which might run community transport need as much freedom as possible to operate in the best way that they can. Transport in rural areas is never going to be covered by the normal bus service network. I am talking about country areas that are away from the major routes. People there need to get to employment and training. The Bill allows for the driver to be paid. I would like there to be no restriction on what type of vehicle is used or, indeed, whether separate fares are collected.
	In Clause 46, I should like to see considerable stringency attached to whether private hire vehicles are allowed to carry passengers at bus stops, as that could undermine parts of the industry. I hope that the private hire vehicles concerned will have to register with the traffic commissioners, that their drivers and vehicles will be suitable and that they will work to a timetable; otherwise—I speak from a lot of experience in Belfast—taxis can very much undermine the quality of bus services.
	I am pleased that the subsidised service agreement has risen from five to eight years. Any franchising or tendering system is highly disruptive, whether in the rail or bus industries. It costs a lot of money both from the authority's point of view and from the point of view of those who are tendering. An eight-year tender will encourage people to invest in new buses, which will benefit, for example, the disabled, about whom we were talking earlier.
	I turn briefly to the question of bus-user representation. There is an organisation called BUS USERS UK and another called the Bus Appeals Body, on which the noble Lord, Lord Hogg of Cumbernauld, sits as chairman and of which I was a previous chairman. It is a non-statutory body but it works. If it were given a little money and if bus operators were required to exhibit information about this committee on their vehicles, that could be very effective. In addition, the Government must realise that in many PTA areas—I cite Liverpool as an example—and in every district council there is a bus users body, there is a body for the disabled at the centre and there is a body that covers the whole area.
	One of our major queries concerns the integrated transport authorities. At the moment, they are all elected but the Bill provides for there to be elected members and other members. We are very interested to know who the other members will be, whether they will have voting powers and whether they will be able to decide the precept.
	Like the noble Earl, Lord Attlee, I am very pleased to see something being done about overseas vehicles and drivers, and I shall explain later why drivers are important. I hope that the fees to be charged by the department for passing on information will be modest, as that will allow some abuses of the law in this country, including road-safety law, to be followed up.
	In Clause 111, I am pleased to see something being done about situations in which the owner of a lorry or the person with the operator's licence is able to get out of the penalty of having the vehicle detained because a hire company owns it and someone else operates it. The vehicles have to be returned because they belong to a hire company, although the operator is at fault. This matter requires attention and should be dealt with.
	Generally, this is a very good Bill, and I shall mention just two or three other things. Concessionary bus fares, to which the Minister referred, are causing huge trouble for a lot of councils. Far more people are using concessionary bus fares than was previously the case, and local councils are trying to reduce the amount of money that they give the bus operator for each person they carry. The whole issue needs urgent examination. If a bus operator appeals, he is largely successful, but the money to pay for that is not available.
	The opportunity could have been taken to do something about licensing pedicabs, which are a big problem. I am also sorry that nothing has been done about introducing a national lorry pricing or road-charging scheme because I believe that that is the essential first step to getting foreign lorries to pay to use our roads. Can something be done about the sat-nav devices which are sending heavy lorries along country roads and causing a lot of damage? Also, operating centres are being established along country lanes because, although the traffic commissioners can rule on the suitability of an operating centre, they cannot rule on whether the roads leading to it are suitable.
	I turn, finally, to foreign drivers, many of whom cannot speak English. They rely on sat-nav devices because they cannot read our road signs and I am afraid a large number of accidents, particularly with cyclists, take place because lorries are going along roads that are quite unsuitable because their drivers cannot read the signs.
	The Bill is very welcome and we support most of it but I think that one or two other things could be added at this stage.

Lord Cameron of Dillington: My Lords, as was heralded by the noble Lord, Lord Bradshaw, I come to this Bill from the perspective of rural dwellers and providers of rural transport. Residents of rural villages travel nearly twice as far by car as their urban counterparts and although one-third of adults in rural areas do not have personal access to a car, rural people take one-third as many bus journeys as those in towns. The reasons for this include the fact that less than half of rural residents live within 13 minutes of an hourly bus and for many countrymen there are no local buses at all. This can be a major barrier to participating in everyday activities, such as education, training, health services, shopping, leisure and, particularly, employment.
	Having said that, large—or even small—buses running around the countryside with hardly anyone in them are a waste of public money. Very often it is not more bus services that are required but more flexible, smaller, on-demand services, run by local voluntary groups or in partnership with other service deliverers, such as the ambulance service or even the post bus. Flexibility is the name of the game.
	There is much to welcome in this Bill from the point of view of flexibility and freedoms, but my overall impression is that it deals largely with urban public transport. Maybe this is intended, which is fair enough, but I hope that public transport in rural areas is of importance to the Government, in terms of both overall carbon footprint and equity of treatment when it comes to access to services. However, I suspect that this Bill is not the right vehicle to make the major improvements to rural public transport and its funding that are needed. We have lost the rural transport partnerships, the community transport fund and the rural bus challenge. With the demise of the Countryside Agency, few of these ground-breaking schemes have survived as there is no real rural transport champion on a national scale.
	Setting that aside, some minor improvements could be made to this Bill which would help. For instance, Clause 8 requires each local transport authority to develop policies,
	"for the promotion and encouragement of ... transport to, from and within their area".
	I particularly like the "to, from and within" bit of that quote, as all too often the catchment area of a market town does not fall neatly into a local authority area. Perhaps the Bill could be improved if local arrangements were made in rural areas which allowed for the boundaries of PTAs to be different to local authority boundaries. As I understand it, such arrangements are currently possible only in metropolitan areas. For example, Yeovil is a large market town in my county of Somerset but it sits right on the Dorset border. Somerset subsidises the rural bus service into Yeovil on its side of the border, but Dorset does less so, if at all. It would probably be to Somerset's overall economic advantage if it could assist the people of Dorset to come and shop in Yeovil; it could do so by contributing to a quality bus service on the Dorset side. But, as I understand it, at present it cannot do so. I would like to hope that this could change.
	On the question of consultation, Clause 9 outlines the process of preparing a local transport plan which should be consulted. These plans are very important for rural areas, especially when catering for needs identified by the accessibility planning process. In terms of the consultation process, it seems to me vital that parish or community councils should be specifically mentioned in the Bill. District and county councillors, who are mentioned, are often not the ones who use public transport. In fact, in my part of the world they would not be able to do their duties without a car. So it is crucial that a picture is built up by asking questions at a parish, or even more local, level. It would also seem sensible that the approval boards must satisfy themselves that the views of parish councils have been sought.
	As I have already indicated, perhaps the most useful aspect of the Bill from the rural point of view is the new flexibility introduced concerning the use of taxis, private hire vehicles and small buses, and the relaxation in Clause 50 relating to community bus services and allowing drivers of such services to be paid. However, I endorse the point made by the noble Lord, Lord Bradshaw, about the need for these services to be able to make a charge for the ride. The charities, which are often running these services, should be able to charge what the market can bear to enable them to keep reinvesting in the service under arrangements in Clauses 19 and 22.
	Still in the context of flexibility, I endorse Clause 86, which gives PTAs powers and encourages them to work in partnership with other bodies to assist them to discharge their functions and vice versa. There is much that can be done to access services, by PTAs working with others such as the health authority, the local education authority, school buses, the Post Office or even jobcentres and magistrates' courts. I hope that this clause will encourage such co-operation.
	The scope for statutory quality partnerships and quality contracts in the rural context is restricted by both the volume of truly commercial operations and the inability of local authorities to offer sufficient infrastructure investment, the opportunities for which are pretty rare in rural areas. Bus lanes, for example, are not suitable in small towns, particularly those with narrow streets. Other sticks used to punish the motorist, such as exorbitant parking charges or congestion charges, go against the grain for rural market towns that are often desperate to encourage customers. Many visitors to market towns just do not have the option of a bus. Thus, in order to achieve the necessary investment in market town bus routes, I propose that it be made possible for a rural PTA to enter into a long-term—say, 10-year—franchise agreement with a commercial operator which incentivises the operator to invest in the route, with newer and more frequent buses for example. In other words, we achieve the necessary investment without the required punishment of the motorists. I hope that this might be made possible.
	All this points, in general, to the case for a different approach to bringing about an improvement in the quality of services in rural areas. There is a requirement for a strategically planned network that harnesses all the available resources: bus services, community transport, taxis and so on. One way forward would be to give local authorities the powers to franchise a whole network of services in rural areas that would incorporate any existing commercial services and, of course, include full inter-availability of ticketing between operators.
	I have misgivings about the potential effects of road charging schemes. While I am all in favour of reducing congestion and discouraging people from using their cars, in order to minimise their carbon footprint, road charging schemes in rural areas could have severe downside social effects. It is already hard for deprived rural people to get to everyday services in their local market town, especially healthcare. There is rarely a suitable bus, and a car is often the only possible solution. Any unthought-out charging scheme could have a devastating effect on these people, without them having any real say in the matter. Clause 98 is pretty vague about who has to be consulted over the introduction of such schemes.
	Another issue of concern to rural communities is the allocation of revenue from any urban road pricing scheme. If, as seems to be currently planned, the revenue raised is used entirely in the urban area itself, it would mean those travelling from and to rural areas would receive no direct benefit from the charges they pay. There is therefore an argument that the adjacent rural areas faced with road charges when entering their town should also receive their share of revenue to spend in their area.
	Finally, although there are no proposals at present for a national road pricing scheme, there is concern that if pricing were introduced on major through routes it would encourage drivers to divert on to adjacent rural roads that are not designed to carry such a volume or type of traffic. That would add to road safety concerns in rural areas by increasing accidents and causing environmental damage. These issues need to be taken into consideration when such schemes are proposed.
	I am aware that I have raised a series of rather specialist rural points, some of which may be outside the scope of the Bill, and I do not expect the Minister to answer every one in his reply, but it would be good to receive comments from his department before I am tempted to take them forward at the next stage of the Bill.

Lord Rosser: My Lords, I support the principles behind the Bill and welcome its introduction. Many local authorities have a good track record on supporting and promoting bus services. However, I will confine my comments to the specific points relating to the bus aspects of the Bill.
	If we are to give local transport authorities greater powers to determine the level and quality of bus services in the context of an overall transport strategy, there is an issue about what could prove to be a somewhat complex, time-consuming and potentially costly procedure for examining, challenging and presumably amending or halting local transport authority proposals. Under the Bill, a network of services can be franchised out in a similar way to bus services in London and the national rail network. These quality contracts would allow the local transport authorities in question to specify and regulate bus networks which bus companies could then bid to operate. Once a company was appointed, it would face no on-road competition for the period of that contract.
	The Bill proposes that an approval board, chaired by a traffic commissioner, will determine an application for a quality contract. The decision of the approval board can then be appealed to a transport tribunal on any matter by any consultee on the original quality contract application. The decision of the transport tribunal can then be appealed to the Court of Appeal on a point of law. I am not clear for whose benefit this potentially lengthy process has been proposed. Is it for the benefit of passengers or of those who may not be unhappy to see a lengthy and expensive decision-making process imposed on local transport authorities? The procedure looks likely to be time-consuming and costly.
	I would be grateful if in reply my noble friend could say why a three-tier process is necessary and whether it could become even longer by going beyond the Court of Appeal. I would like my noble friend to spell out for whose benefit or protection the procedure has been introduced and, in particular, why the proverbial passenger on the Clapham omnibus should be grateful that it is there. I would like my noble friend to say what adverse or damaging actions could be perpetrated, by whom and to whom, which only these procedures in the Bill could address. Perhaps my noble friend could also give some idea of what the Government envisage could be the costs involved in pursuing or opposing challenges being pressed right the way through the procedure set out in the Bill. Could it run into tens of thousands of pounds or hundreds of thousands of pounds, and who pays the bill?
	It is clear that if it is a potentially lengthy and costly procedure, it would be a deterrent to a small bus operator. But, equally, if confronted by one of the major bus and rail companies, it could lead to a transport authority not pursuing a quality contract scheme or heavily amending it to buy off objections if there was a possibility of the transport authority being left with a substantial bill for costs. Running the risk of having transport strategies for the benefit of communities determined not by the merits of the proposal, but by the financial clout of the parties involved does not seem to be a particularly effective process. Perhaps my noble friend could also give some idea of the maximum time the Government think it could take to determine an application that goes through all the stages of the process set out in the Bill. It will not be very helpful if the process can be strung out for so long that it can be used as a delaying tactic by those opposed to what is proposed and acts as a block on speedy and decisive action by local transport authorities. Are these, in terms of delay and costs, the Terminal 5 clauses in the Bill?
	I appreciate that traffic commissioners and transport tribunals have expertise in vehicle safety and operational issues, but the powers they appear to be being given under the Bill will, in practice, enable them to decide whether a local transport authority or city region's transport strategy should be allowed to be implemented. Perhaps when my noble friend responds he will say whether this is the case and, if so, why it is felt that unelected bodies, with no responsibility or accountability for transport strategy, or, I would suggest, current expertise in this field, should be able to thwart elected bodies with that expertise, responsibility and accountability. If the principle is that power should be devolved as far as possible to local transport authorities for matters that relate to their particular area and do not affect national policy or strategy, or impact on other areas, why are decisions on whether and in what form local or conurbation transport strategies should be implemented being devolved down to traffic commissioners and traffic tribunals?
	If unacceptable or defective strategies are drawn up and implemented, why should redress be through an external, unelected body rather than through the ballot box as it is in respect of other areas of local government activity—including, as I understand it under the terms of the Bill, in respect of any decisions by local authorities on whether to exercise the power given to them in the Bill to introduce road-user charging schemes?
	I turn now to the situation which appears to exist for the staff affected if the right to operate bus services under a quality contract is transferred from one operator to another. I have read the relevant clause in the Bill, which appears to provide for protection of existing terms and conditions of employment for staff transferred from one operator to another in such circumstances. However, I am not sure whether the clause means that all staff employed in the operation of services so transferred will be transferred, or whether the new operator can decide not to take on all staff involved. It would be helpful if my noble friend could clarify that position and also the position on protection of the existing and future pension entitlements of staff affected.
	I am aware that this could be a difficult area. Obviously if a transport authority letting a contract wants to reduce the number of operators running services and instead have only one bus company running all the routes in question, then it may be that not so many staff will be required as an element of duplication may be removed. Thus the new single operator may not need all the staff previously employed in running the services when there were a number of different operators involved. On the other side of the coin though, the measures in the Bill on quality contracts are hardly likely to be received with enthusiasm if staff see them as a potential threat to their jobs and their pensions. There is a turnover of staff in the bus industry through which adjustments can be made to new staffing levels, and if the package is attractive enough some staff might take genuine voluntary redundancy. I hope my noble friend will be able to give some re-assurances on the point of job security in respect of both the initial introduction and the transfer of quality contracts.
	There are also questions relating to physical assets and infrastructure arising from the introduction or transfer of these quality contracts. The owner of a very large bus and rail company was quoted in a Sheffield paper just over a year ago as saying:
	"If franchising or Quality Contracts are brought in we will put our depots up for sale in South Yorkshire. That is not a threat, it's just that we don't think it is the way to make the system work".
	So, under quality contracts, what will be the position in regard to the transfer or non-transfer of, for example, vehicles and depots? Is it the intention that the transport authority letting the contract should own the vehicles or the depots; or will it be for a new operator to include the provision of such assets in any bids they submit?
	If voluntary partnership arrangements cannot be agreed—the provision in the Bill for "admissible objections" from relevant bus operators to stop such arrangements makes it appear more than likely—it is essential that we have a process and procedures for quality contracts that enable decisions to be made without undue delay by accountable bodies, and that allow for the voice of interested parties to be heard before final conclusions are reached. We also need to ensure that the introduction or retendering of quality contracts cannot be used as a basis for issuing redundancy notices to some of the staff affected. I hope that my noble friend will provide some assurances on the points that I have raised when he responds.

HM Revenue and Customs

Lord Davies of Oldham: My Lords, with the leave of the House, I shall repeat a Statement made by my right honourable friend the Chancellor of the Exchequer in another place this afternoon. The Statement is as follows:
	"With your permission, Mr Speaker, I should like to make a Statement on the breach of procedures which led to missing personal data relating to child benefit from Her Majesty's Revenue and Customs. "I shall set out the nature of the data and circumstances relating to how they went missing. However, it might be helpful to the House to set out the background before I do that."The National Audit Office, which is independent of government, but answerable to Parliament, has a right to ask for and access data from HMRC in discharging its compliance responsibilities. In March of this year, it appears that a junior official within HMRC provided the National Audit Office with a full copy of HMRC's data in relation to the payment of child benefit. It is clear that, in doing so, the strict rules governing HMRC standing procedures were not followed. These procedures relate to the security and access to data, as well as their transit, to ensure that data are properly protected. This information should not have been handed over by HMRC in the way that it was. However, I understand that, in this case, the National Audit Office subsequently returned all the information that it received in March to HMRC after auditing it."It now appears that, following a further request from the National Audit Office in October for information from the child benefit database, again at a junior level and again contrary to all HMRC standing procedures, two password- protected discs containing a full copy of HMRC's entire data in relation to the payment of child benefit were sent to the National Audit Office by HMRC's post system, operated by the courier, TNT. The package was not recorded or registered. It appears that the data have failed to reach the addressee in the National Audit Office. "I also have to tell the House that, when it was found that the package had not arrived at the National Audit Office, a further copy of this data was sent, this time by registered post, which did arrive at the National Audit Office. However, again, HMRC should never have let this happen. "Although it is believed that the data were sent from HMRC to the National Audit Office on 18 October, the fact that they did not arrive was not reported to HMRC's senior management until 8 November—nearly three weeks later. I was informed on Saturday 10 November and immediately instructed that comprehensive searches be carried out of all premises where the missing data might be found. These searches are continuing."I asked for an immediate investigation, which was initiated that weekend. I also insisted that immediate steps be taken to prevent this happening again, and action has been taken. On Monday 12 November, HMRC informed me that evidence of the route taken by the data might have been found and that the data were likely to be found. However, by Wednesday 14 November, it was clear to me that HMRC's searches had failed to find them. I therefore instructed the chairman of HMRC to call in the Metropolitan Police to conduct a full investigation to find the missing package. That investigation is still under way. Our priority was and is to find those data. Searches have been and continue to be carried out, including of HMRC and National Audit Office premises. Staff are being interviewed, but so far the missing data have not been found. The police tell me that they have no reason to believe that those data have found their way into the wrong hands. The police are not aware of any evidence that they have been used for fraudulent purposes or criminal activity."Let me tell the House what is missing as a result of this extremely serious failure on the part of HMRC to protect sensitive personal data entrusted to it in breach of its own guidelines. In terms of protecting confidential data, Her Majesty's Revenue and Customs is operationally independent of Ministers. It is established by statute. It is run by its chairman, Paul Gray, and a board of commissioners who are responsible for its operations, but answerable to Parliament through me. "Last week Paul Gray told me on his own initiative that, given the seriousness of the operational failing, he felt that he should resign. He has now confirmed that intention. I am very grateful to Paul Gray for his contribution to the work of government in Her Majesty's Treasury, the Department for Work and Pensions and in HMRC."The missing information contains details of all child benefit recipients: records for 25 million individuals and 7.25 million families. These records include the recipient and their children's names, addresses and dates of birth, it includes child benefit numbers, national insurance numbers, and, where relevant, bank or building society account details."I regard this as an extremely serious failure by HMRC in its responsibility to the public. In making this Statement today, I have had to balance the imperative of informing the House and the public at the earliest opportunity, while at the same time ensuring that when I did so the appropriate safeguards were in place to protect the public, including in relation to bank accounts. Indeed, the banks were adamant that they wanted as much time as possible to prepare for this announcement. "I discussed this with the Information Commissioner on Thursday who agreed that appropriate remedial action needed to be taken before a public statement was made. That action has now been taken."I have also sought the advice of the Financial Services Authority and the Serious Organised Crime Agency. Other government departments have been made aware."Mr Speaker, let me set out what we have done. First, the UK Payments Association, the British Bankers' Association and Building Societies Association have been informed. Through them HMRC informed individual banks and other financial institutions, including building societies and post offices, of affected accounts. Secondly, individual institutions are flagging these accounts, which enables them continually to monitor for irregular activity. They tell me that so far they have found no evidence of such activity."Thirdly, they are also tracking back and analysing transactions on affected accounts back to 18 October. They have again so far found no evidence of unusual activity. They will continue to monitor these accounts so that if there is any suspicious activity, action can be taken immediately."Fourthly, if someone is the innocent victim of fraud as a result of this incident, people can be assured that they have protection under the Banking Code so that they will not suffer any financial loss as a result. "The UK Payments Association has confirmed that it is confident that every action has been taken by the banking industry to minimise the risk of any fraud. It has also confirmed that the missing data are not enough in themselves for someone to access a person's bank account for fraudulent purposes, as additional security information and passwords are always required. But we have to recognise the increased risk caused by this missing data, so people will want to monitor their accounts and guard against any unusual activity."The advice of banks is that there is no need for customers to ask for a new account or to contact their bank or building society. But they should do what they should be doing anyway: they should check their statement and keep a close eye on their account for any unusual activity; if they see anything in their statement that concerns them, they should then contact their bank or building society immediately; and they should not give out personal or account details requested unexpectedly by phone or e-mail. "I reiterate: the banks have made it clear that individuals will not have to pay out for any loss in the event that they are innocent victims of fraudulent activity. I can also assure the House that child benefit payments will continue to be paid as before. There are already clear HMRC standing procedures, which appear to have been broken. HMRC has initiated changes to security processes and procedures so that those will now take place only with written authorisation from a senior HMRC manager and with the appropriate protection for the transfer. "The police investigation continues, though there is also likely to be an inquiry into the missing data by the Independent Police Complaints Commission, which has a responsibility for monitoring HMRC. I have kept the Information Commissioner informed. It is highly likely that there have been breaches in the Data Protection Act. That is something the commissioner will investigate."The Government take the protection of personal data, in whatever form, extremely seriously and have therefore put in place and are strengthening the rights and safeguards on use and handling of such data. The Data Protection Act set out the framework enforced by the Information Commissioner and the courts. Departments have specific controls on information sharing and duties of confidentiality that are being enhanced by amending the Data Protection Act to guard against misuse, and by providing further information for citizens about the information that the Government hold. "Last month, the Prime Minister asked the Information Commissioner and Professor Mark Walport, director of the Wellcome Trust, to carry out a review of the framework in the UK to ensure the security of personal data. That review will look at government departments and other organisations. I can also tell the House that the Comptroller and Auditor-General, Sir John Bourn, has said that the National Audit Office will review its own procedures for requesting data, to confirm that these remain in line with best practice. It will apply any lessons arising. "In addition, the House will be aware of other data security breaches by HMRC, including the loss in transit at the end of September of the records of around 15,000 people by HMRC's external courier. In the same month, a laptop and other material containing personal details relating to HMRC customers were also lost. I have therefore asked Kieran Poynter, chair of PricewaterhouseCoopers, to investigate HMRC security processes and procedures for data handling. I have asked for an interim report next month and a full report in the spring. That review will be conducted in consultation with the Independent Police Complaints Commission and a full report will be made available to the Information Commissioner. I express my gratitude to the Metropolitan Police for its investigation, to the Information Commissioner for his advice and to the banks for their co-operation in working with the Government to take steps to protect the public."The House will understand that because the investigation is continuing I am not yet in a position to give a full account of what has happened here, but I will continue to keep the House informed. This is an extremely serious matter. HMRC has a responsibility towards the general public who entrust it with highly sensitive personal information. It has failed to meet the high standards that should be expected of it. I recognise that millions of people across the country will be concerned about what has happened. I deeply regret this, and apologise for the anxiety that will undoubtedly be caused. "Let me reiterate: there is no evidence that these data have reached the wrong hands, and no evidence of fraud or criminal activity. Banks and building societies are putting in place safeguards to protect people's accounts, and they will continue to monitor those accounts. No one will suffer any loss if they are an innocent victim of fraud and I will, of course, keep the House updated of any further developments".
	My Lords, that concludes the Statement.

Baroness Noakes: My Lords, I thank the Minister for repeating the Statement. This is a sorry tale of incompetence and mismanagement in the Treasury's own back yard. We already knew that HMRC was prone to running computer systems which caused operational problems and that its operation of the tax credits system resulted in the incorrect payment of more than 40 per cent of tax credits. Now we are told that the records for 25 million individuals have gone missing.
	The Minister has told us that after 18 October when the junior official was first aware that the data were missing, the only thing that happened is that the official sent another copy of the information. Apparently, this person kept the information about the data loss to himself until 8 November. Can the Minister explain what kind of organisation would encourage its junior staff to behave in this way? There is something very wrong with an organisation that is incapable of admitting to errors or unable to respond to them. We have learnt something very distressing about HMRC's culture and the way in which it behaves.
	This is not the first time that data have gone missing when in the care and custody of HMRC. A couple of months ago we heard that a disc with the confidential data of more than 15,000 people got lost between HMRC and Standard Life. In August 2007 it was reported on BBC radio that a laptop with confidential ISA data was stolen from an HMRC official's car. It took a number of questions from my honourable friend Mr Mark Hoban to extract from HMRC the fact that 41 laptops went missing in the 12 months to September 2007. In May 2007, a faulty printer was blamed by HMRC for 42,000 families in receipt of tax credits having their bank account details revealed to other people, and only this week the BBC "Watchdog" programme featured other errors which caused misery and mayhem to the life of some individuals whose data were incorrectly released.
	When we debated the creation of HMRC under the Commissioners for Revenue and Customs Bill in early 2005, we noted with some concern that the integration of the Inland Revenue and Customs and Excise was proceeding with very little information about how the integration of the two organisations was going to be effected. We were concerned about the merging of two separate cultures without a clear plan of action and about the lack of specificity about the integration plans. It was clear to us that the Chancellor and his Treasury were fixated on realising £100 million of ongoing cost savings above all else. Unfortunately, we did not suspect that the organisation that would be created as a result of the Act would be so careless about the data of individuals.
	During the passage of the Bill, we pressed the Government hard on the data protection provisions and, in particular, wanted to be sure that the protection of confidential data was managed and overseen at the level of the board itself, with rigorous and documented procedures. We were only partially successful in persuading the Government to accept some changes to the Bill. We were often told that data protection was taken very seriously in both the Inland Revenue and in Customs and Excise and that we must not hamper the operational effectiveness of the organisation. We did not press all our amendments but, with the benefit of hindsight, we should have done so.
	Because we believe that data protection responsibilities need to start at the top, it is clearly right that the chairman of HMRC should resign. He and his fellow commissioners had plenty of warnings that things were not right and they should carry the can. But they are not the only ones and officials at all levels between the board and the junior official at the centre of this affair need to examine the part that they played, whether by act or omission, in this sorry tale.
	The Minister has said that Mr Poynter from PricewaterhouseCoopers will carry out a security review. Will the Minister make the terms of reference for that review available to Parliament and commit to making Mr Poynter's interim and final reports available to Parliament? Will he also say how the Information Commissioner will be involved? I am aware that he is carrying out the wider review described by the Minister this afternoon, but will the noble Lord confirm that the Information Commissioner can have complete and unfettered access to HMRC to carry out his own investigations if he so chooses? I am sure that PricewaterhouseCoopers will carry out a review admirably but we would also like to be sure that the public sector's own data protection expert will be able to pursue these issues.
	The disclosure of personal data without proper reason is illegal under data protection legislation and specific offences are built into the 2005 Act. There are data protection offences all over the statute book but I do not believe that they have been used much. Can the Minister confirm that all individuals who are found to have breached the law in this case will be considered for prosecution?
	Over the past few years the Government have created statutory data gateways all over the public sector and seem intent on creating one great data free-for-all across the public sector. It is all in the name of customer service and efficient service delivery but it carries with it great dangers. We were assured that HMRC has the confidentiality of data at its core. There is even a statutory confidentiality declaration made by each member of HMRC's staff. If HMRC can make the kind of errors that we have heard about today, what could go wrong elsewhere in the public sector? We certainly await the review in which the Information Commissioner is involved and we hope that it will have at its heart the need to protect data and not compromise them in the name of modernisation.
	The case before us today involves child benefit records and therefore involves data concerning children. The organisation Action on Rights for Children has reminded us today of the concerns that it has expressed, and that we share, about the large children's database that the Government intend to create. Will the Government pause its development and think again about the dangers of information held on databases about children, some of the most vulnerable members of our society? Will they commit to a full review of the national identity database which will underpin the identity cards that the Government propose? Every citizen in the land will fear for the security of his or her information which has been entrusted to the Government. The Government ought now to recognise that there are huge dangers for individuals when their information is transferred, however well intentioned the policy intent.
	There needs to be a full public debate on the collection, handling and use of personal data before we go any further on these issues—including the national identity database—and I hope that the Minister will commit to that too.

Lord Newby: My Lords, we thank the Minister for repeating the Chancellor's Statement on this sorry tale. I am afraid that the Chancellor is not having a desperately good week and we can hope only that tomorrow is a calmer day.
	When the Bill merging Customs and Excise and the Inland Revenue came before your Lordships' House, we spent a lot of time scrutinising data sharing between departments—as the noble Baroness pointed out. However, we were less than wholly diligent in our work in that we failed to include a clause which said, "Thou shalt not simply post the stuff out without keeping any records of where it is going or when it went".
	On the specific issues, can the Minister say how many other HMRC CDs have been posted out over the past six months to other government departments and what information they might contain? As the noble Baroness said, we have had several incidents over the past few months that have come into the public domain in this area. Given the clear lack of any rigour on the part of junior staff in this case, it is very difficult to believe that these were completely isolated incidents. It also raises the question of how other government departments operate in similar circumstances. Data are regularly being shared between government departments and in this case they are being shared in the most cack-handed manner possible. What assurances can we have that across government we do not have junior officials simply putting CDs containing other sensitive material in the post?
	At the end of September, when we were looking at the previous lapse of security in this area, HMRC announced,
	"We have also reviewed our arrangements and introduced safeguards to prevent this happening in future".
	Given that events since have led to an even more serious breach of security, can the Minister explain what arrangements and safeguards were introduced in September and why they failed so spectacularly in this case?
	Why on earth is HMRC still using CDs for data transmission at all in this day and age? Does that point out a more fundamental problem in terms of its IT systems? We believe that there are a number of problems related to the Capgemini contract, and that a gateway review has been undertaken to investigate them—a review on which, incidentally, it is alleged that the Chancellor plans to go to the High Court to prevent it being brought into the public domain. Exactly what broader problems are there in relation to IT in this department?
	Is not the failure a symptom of the consequences of an ill thought-through merger? As the noble Baroness said, we spent a lot of time concerning ourselves about how two large departments with distinct histories and staff were brought together when it was clear that significant training would be required if staff at all levels were to do their new jobs properly. Unfortunately, far from additional resources being made available to ensure that the integration worked sensibly, we had severe staff cuts—25,000—in the department under the Gershon programme. My colleagues in another place have been dealing with the practical consequences of that for months—the increasing difficulty of taxpayers getting a sensible response from the department, in terms of their own affairs. Is not the problem that we are dealing with today yet another symptom of the low morale, poor procedures and inadequate resources that have flowed from the merger and the Gershon programme?
	The Statement says that the Comptroller and Auditor-General will review the NAO's procedures for requesting data. I hope that he will also look at its procedures for dealing with data when it gets them. The Statement does not say when it returned the data—earlier in the year, it put them in an envelope and sent them back in the way it got them. For the NAO to request data in this manner—perfectly happily accepting them in a brown paper envelope and not drawing it to the attention of Customs—seems peculiarly dilatory.
	Finally, there is the question of the increasing responsibilities of HMRC. The child maintenance Bill proposes that additional responsibilities for managing a system are given to it. Given the problems that we have debated today, one wonders whether now is the moment when further responsibilities should be heaped on that department. Leaving them to one side, surely if ever there were an example of why we should be careful and critical about an ID card scheme, this is it, as the noble Baroness said. If such information relating to 25 million people—almost half the population of the UK—can be willy-nilly put into the public domain, so far as we know, because some junior clerk does not follow procedures, how can any citizen believe that they can be secure of their information not being made available under an ID card scheme? Among its other consequences, I hope that this matter sounds the death knell to that scheme.

Lord Davies of Oldham: My Lords, I am grateful to the noble Lords for the points they have made. The noble Baroness has accurately identified what we said in the Statement; namely, that there was an extensive gap between the disks being sent and lost and senior management being made aware of that loss. The loss was discovered on 24 October and senior management did not know anything was awry until 8 November. We make no bones about it: that is completely unacceptable. When the noble Baroness says that all the individuals who have been close to the operation should examine their role in it, she is right, and I assure the House that others will also examine the role of those officials in this situation. What took place is quite unacceptable.
	I do not accept the noble Baroness's suggestion that the problem comes from the merging of two cultures with the formation of HMRC. This kind of mistake and lax behaviour and the failure to observe proper procedures would be unacceptable in any culture. I assure her that the review that is being carried out will be made available to Parliament so progress will be monitored, although HMRC does not make its disciplinary procedures public. This is a severe crisis for the organisation. Its chair has resigned and the impact on all staff concerned with this sorry affair is still to be thoroughly investigated. No stone will be left unturned as we learn what we can from the situation. If people have been remiss, as some clearly have, in fulfilling their obligations, they will face appropriate sanctions, but the inquiry will also be concerned to learn lessons so there is no question of any repetition of such a development in the future.
	Strict procedures were in place. They were not followed in these instances. HMRC has strengthened its guidelines and will make sure that its data security guidelines are followed meticulously; that will be a clear obligation upon all management throughout the organisation.
	What does this mean for the Government with regard to data sharing? I am not able to say how many disks have moved between government departments, and I do not think the noble Lord would expect me to be able to answer that question. The question that lies behind that is: "Is the transfer of such information covered by strict guidelines and secure?", and the answer is that it is—unless there is a serious lapse of this kind, which has the widest repercussions.
	My right honourable friend the Chancellor of the Exchequer did not exactly enjoy telling the nation about this lapse, nor can he do anything except apologise for the implications for the large numbers of the public who will be exercised about this problem. All government departments will be well aware of the necessity of following correct procedures, which on this occasion were manifestly not followed. That is why, for instance, the disks had no greater security than passwords—they were not encrypted.
	I want to reassure the House on that front. The thrust of the noble Baroness's remarks was about identifying accurately what went wrong. Not only will lessons be learnt from that on how we can improve procedures, but action has already been taken to ensure that existing procedures—which, if followed, would certainly not have given rise to this lapse—will be followed meticulously.
	On the future of government information, the whole House will recognise that the Government will need to reassure the nation of confidence in data protection, not least because there is no way in which we can serve the community without guaranteeing that confidence to the nation.
	The noble Lord, Lord Newby, asked about failures in the recent past—which the Chancellor of the Exchequer identified in his Statement. Those were nothing to do with CDs in the post—a stolen laptop was one of the previous lapses, for instance. The subject of today's Statement was a specific case. The noble Lord said it was due to low morale among the staff. That is an easy thing to assert and difficult to refute. I say that members of the government service—we all meet many of them in our daily lives—carry out their duties with proper attention to their responsibilities, but here was a catastrophic lapse where someone did not.
	The noble Lord ought not to suggest that the National Audit Office was remiss in the way it requested the information. The National Audit Office asked for the information and it was the responsibility of HMRC to ensure that it was transmitted in a secure fashion—an obligation that was not followed through.
	I reiterate that the Chancellor of the Exchequer did not make the Statement to the House until he had assured himself of a severe tightening up of procedures within his department. He also set out to make sure that the public was safeguarded by the full co-operation of all those who would be in possession of customer accounts, in order to effect the best possible protection to people with such accounts.
	On ID, noble Lords will recognise that part of the problem arose because of the limited nature and degree of security involved. ID cards are meant to improve aspects of that.
	I reiterate, the lapse was unacceptable, but day by day, right across government, such procedures are conducted with care, scrupulously and according to proper procedures. Such a lapse is unacceptable and requires the most immediate and proper action. The Chancellor of the Exchequer has already taken such action, and promised further action to tighten up procedures for the future.

Baroness Farrington of Ribbleton: My Lords, I remind the House that the limited time of 20 minutes for Back-Bench interventions is for brief comments or questions only.

Lord Skelmersdale: My Lords, one good thing to come out of this disgraceful incident is that child benefit will continue to be paid. Were I a novelist in your Lordships' House, I would think long and hard before putting such a story into one of my novels. Be that as it may, why it is necessary for the NAO to have such data, in such enormous detail, and why cannot anonymised data be used, such as other organs within government would use?

Lord Davies of Oldham: My Lords, that is a very important question which we expect the review to look at very closely. It may be that what was sent to the National Audit Office in the disk was information above and beyond that which it needed for its purposes. The failure there would have less to do with the request from the National Audit Office than from the way in which the information had been prepared for it. We await the review on that. The Chancellor is concerned that that should form an important part of the review to be carried out which, of course, will be reported to Parliament.

Lord Christopher: My Lords, I have had 40 years of close connection with the Revenue department, 10 of which I was in it and subsequently with the Inland Revenue Staff Federation. The Chancellor certainly deserves credit for the thoroughness and care that he has taken in dealing with this matter once it came to his attention. As two speakers have already hinted, I believe it would be a mistake for inquiries to be limited simply to the issue of data, important though that is.
	The Revenue is now being dealt with very differently from how that was done in the past. Culture, which was strong and valuable in the department, has been driven out. That is not something for which I would blame the present Government; if one is honest about it, it started in the days of the noble Baroness, Lady Thatcher. It is now treated like a factory and if one treats a department like a factory results of this nature will occur. To my knowledge, only one member of the board of the Revenue has revenue experience and that was in a specialist department. I think there may be someone from Customs, but I am not sure. The heads of many of the departments have no previous experience in this area. I strongly urge my noble friend to give some assurance that an examination of what is happening there will go beyond that and look at the management style and at the way in which staff are now being treated.

Lord Davies of Oldham: My Lords, the House will recognise the almost unrivalled experience of the relevant department that my noble friend brings to the issue. I assure him that all procedures are being examined. This is a matter of successful and proper management. I assure my noble friend that he is right in that unless one gets management structures right and the staff are co-operative, difficulties may flow. It is the responsibility of management to ensure that staff co-operate and enjoy their work as well as they are able and that they fulfil their duties properly. He will appreciate that no stone will be left unturned in examining how the issue arose. The points that he wants examined will indeed be examined. We will require that degree of thoroughness because there can be no question of a lapse of this seriousness ever happening again.

Baroness O'Cathain: My Lords, I have two questions for the Minister. The Statement from the Chancellor of the Exchequer says that the HMRC,
	"is operationally independent of Ministers. It is established by statute. It is run by its chairman ... and a board of commissioners who are responsible for its operations, but answerable to Parliament through me".
	Where does the buck stop? The chairman has now gone and the board of commissioners, according to what the noble Lord, Lord Christopher, says, does not have the experience. It could be in free fall even more now. What responsibility does the Chancellor of the Exchequer take personally?
	Secondly, did anyone anticipate that there would be a real problem of morale following the merging of two major organisations and that staff who might be threatened with the cuts could do this out of sheer misery? There are ways that commercial organisations have had to cope by appointing someone tasked specially to bring large organisations together. Did HMRC have someone like that?

Lord Davies of Oldham: My Lords, the question of where the buck stops is quite clear. HMRC is operationally independent; that is why the chair has resigned—he takes responsibility for a clear management failure. But the buck also stops with the Chancellor of the Exchequer, who is responsible for the department in which HMRC is located. Seized by his responsibilities, the Chancellor, of course, immediately took action to minimise the impact upon the public of this catastrophic failure. That is why he acted in the way that he has as soon as he was informed of the calamity and is why he brought to Parliament today his full Statement on what has gone wrong, the action he has already taken to minimise the damage and the action that he intends to take to guarantee that such an event does not occur again. That is the clear line of responsibility.
	As to the merging of departments, although this was a more significant bringing together of two former organisations, the House will recognise that the public service sees considerable reorganisations quite frequently, in terms of both efficiency and costs. The noble Baroness will recognise that her own side, too, is very keen to point out from time to time the way in which costs can be reduced by more effective administration. It is the responsibility of every Government to seek to improve the quality of their administration. It is clear that we have particular lessons to learn from this event and the Chancellor has made it clear how he proposes that the nation and particularly the Government should learn those lessons.

Lord Northbrook: My Lords, the Chancellor was informed of this serious incident on 10 November. Does the noble Lord agree that it is a serious matter that the House has not been informed for more than 10 days afterwards? Secondly, I would like to add to the question of the noble Lord, Lord Newby, about all this information being passed around on CDs. While I am not at all a computer expert, that seems to be a strange way of proceeding. How many other unencrypted CDs are floating around the country? Thirdly, HMRC has been stretched in many ways—it has been entrusted with the distribution of tax credits and the former Chancellor has demanded 25,000 redundancies or job cuts by way of efficiency savings. Is it any wonder that HMRC is in such chaos?

Lord Davies of Oldham: My Lords, I sought to reply earlier on the question of the length of time. The noble Lord will recognise that two issues confronted the Chancellor as soon as he knew that this loss had occurred—first, that the intensity of the search for the missing discs should be stepped up. That is why he intensified the search and then brought in the Metropolitan Police in the hope that the discs would be recovered, which regrettably has not occurred, as yet. Secondly, he was obliged to make sure that the public were protected with regard to their accounts with financial institutions and the banks. The Chancellor needed the fullest possible co-operation from all sectors of the industry where this information related to individual accounts. He has had that full co-operation. That is why we can say with confidence, at this stage, that we know of no reported instance at all of untoward development as a consequence of this information.
	We also have every bank working on their customers' behalf, operating the closest watch on personal accounts. If anything untoward occurs, the customer is made aware. That is not achieved overnight, but it was essential that it should be in place before the Statement to the House. The Chancellor has to balance the obligation to report to Parliament about an issue as serious as this as soon as he is able against effective and necessary action to safeguard the needs of the public.

Lord Barnett: My Lords, this is clearly an appalling lapse by officials in the department concerned. I am prepared, obviously, to leave this matter to further investigation and, I hope, some effective action. However, can my noble friend ensure that staff cuts are not blamed for what happened? As the noble Lord, Lord James, will know from his examination and the Gershon report, in huge government departments it was right that efforts were made to cut staff numbers to create a more effective department. Can my noble friend ensure that there is no question of rushing to blame the whole lapse of management on the staff cuts?

Lord Davies of Oldham: My Lords, I am grateful to my noble friend for putting that issue in context. There have been cuts in a number of departments as a result of work on efficiency, and there has been a massive reorganisation as a result of work by the Government; we have not had a lapse of this seriousness or to this extent in any other department. My noble friend is right about that.
	The obvious point is that procedures were not followed effectively in this case. There is no evidence that it concerned someone suffering from an enormous overload of work or insufficient supervision. The problem was that procedures were not followed. That lapse cannot be countenanced. Neither I nor anyone else in the House can put the lapse down to insufficient numbers of staff without more evidence than I have at my disposal at the moment.

Lord Brooke of Alverthorpe: My Lords, I, too, was involved in the HMRC Bill, during whose passage confidentiality issues were dealt with. First, regardless of whether Customs and the Inland Revenue had merged, if procedures had not been followed this breach could have happened under the old Inland Revenue. Secondly, can the Minister confirm that while there is a target of 25,000 cuts, in fact only 12,500 cuts have been delivered? If so, and if there is a problem with staffing, will he undertake to ensure that proper staffing is in place before the Government proceed with the further 12,500 cuts to meet the target? Thirdly, did loss of the disk on 18 October arise because of the internal postal service of the merged Revenue and Customs or is there an outsourced service that acts on behalf of the new department? Fourthly, has it been established if any other items went astray on the same day?

Lord Davies of Oldham: My Lords, on the latter point, the TNT courier service was used for this delivery. It will be recognised that other deliverers—in particular, Royal Mail—were in some difficulty at the time because there was a suspension of some services. However, as I have sought to make clear all afternoon, the failure was in the procedure relating to the disk and its security and the fact that it was entrusted to a courier service, which can be of a high standard but is, nevertheless, an external service, and we all know that, by definition, there are limited guarantees in that. That was the process. Where the fault lay is still to be identified, but clearly responsibility rests with the person who pursued this action and the question is whether, in carrying out that action, they followed proper departmental procedures.
	I tried, however inadequately, to answer my noble friend on a question a moment ago about cuts. I do not think that cuts have anything to do with this. Of course, economies are being effected across the government service, but that can happen while guaranteeing the service. It is management's role to ensure that, otherwise the cuts would not be justified. I assure my noble friend that due process will be followed in the department on any development.

Lord Northbrook: My Lords, can the noble Lord answer the question that I posed earlier about whether disks are the most sensible way for this information to be sent around and should a review of this should be carried out?

Lord Davies of Oldham: My Lords, that issue will certainly be considered by the review, but I think that encrypted disks with proper security can be used effectively. We all recognise the enormous convenience of using disks, but these two disks were safeguarded only by passwords, which provide very limited security, and that is certainly unacceptable.

Lord Skelmersdale: My Lords—

Lord Stoddart of Swindon: My Lords, we have been assured that there are strict procedures to prevent data leaking into unauthorised hands but it is clear that the methods are not successful and that they are not doing the job. I know that the Minister said that there will be a review but, during that review, will the Government examine whether they can handle all the information that they are now demanding about people, whatever they are doing—for example, medical records, the children's database, the 53 pieces of information that will be required by people who travel and the ID card database? Will it be possible for government to manage all that, plus very much more information? Is it all necessary and will that be inquired into when the safeguarding of systems is reviewed?

Lord Davies of Oldham: My Lords, the review will look at this department's procedures and at any lessons that can be learnt across government. However, there is a massive movement of information across government departments and between government agencies and external organisations, and safeguarding the privacy of data takes place every day.
	When we get a lapse of this nature, we recognise that it is essential that all procedures are followed meticulously and that those procedures are fail-safe. The noble Lord will recognise that over a vast area of the government service there is no question but that data are handled entirely properly. As for the future, technology makes it possible for Governments and for all organisations to acquire information on a scale which could not have been contemplated 20 years ago. What is incumbent upon Governments and other organisations is that information should be used only for the purposes for which it is intended and safeguarded properly. It is the responsibility of the Government to ensure that that occurs with regard to all their information.

Local Transport Bill [HL]

Second Reading debate resumed.

Lord Roberts of Conwy: My Lords, we return to the Second Reading of the Local Transport Bill. While much of the Bill applies to England and Wales, there is one clause that applies to Wales only and is of particular interest. That is Clause 109 which transfers specific legislative powers to the National Assembly for Wales and has already been mentioned by the noble Lord, Lord Bassam, and by my noble friend Lord Attlee. This clause is one of three such clauses which will appear in Bills to come before your Lordships this Session. Similar clauses appear in the Education and Skills Bill and the Planning Reform Bill. These framework clauses, as they are called, will enable the National Assembly and its Government to pass Assembly measures which will have the same effect and force as measures passed by this Parliament. Such clauses are not new to us in Parliament but they are constitutionally important in that they augment and enhance the powers devolved to the National Assembly. I am sure your Lordships would wish to be aware of that. The main powers transferred in Clause 109 relate to schemes for charging for the use of trunk roads in Wales. Trunk roads are the roads for which Welsh Ministers are responsible and they include the major east-west arteries such as the M4 in the south and the A55 in north Wales.
	We are informed by the very useful memorandum on these framework provisions supplied by the Welsh Assembly Government that there are no plans to amend the provisions relating to trunk road pricing schemes on an England and Wales basis and that this seems an appropriate opportunity to seek legislative competence for the Assembly,
	"in respect of the possible development and implementation of pricing schemes for users of trunk roads in Wales".
	I think we are all aware by now that there is no similar pricing proposal for England and its national roads. I recall a massive public protest against it on the No. 10 Downing Street website some time ago and I believe that the number of protests reached a record level of 1.8 million.
	One's first reaction to the Welsh proposal is fearful to say the least, fearful that the Assembly Government might impose charges for the use of the major arteries I referred to earlier—the M4 and the A55—which supply the life-blood of Wales, as if the Severn Bridge tolls were not enough of a handicap for travellers to the Principality. As someone who had responsibility as a Minister for roads in Wales in the 1980s, I am aware of the vital role major roads played in attracting new industry and contributing to prosperity. It is a fact of life that road traffic increases when the economy prospers and that there is a direct relationship between the two, a point made by the noble Lord, Lord Bassam. Similarly, road traffic declines during a recession. We tend to forget that we are approaching hard times now by all accounts, and economic growth next year is already forecast to be lower than expected. Clearly, in these circumstances, we must do nothing which threatens our economic well-being in Wales or elsewhere in the UK.
	The thrust and justification for road charging schemes to date has been that they help to reduce congestion, but it is not inconceivable that the financial proceeds of road charging can in themselves be a powerful stimulus, especially in times when local authorities are strapped for cash, which currently appears to be the case. Some authorities in Wales, for example, have had allocations from the Assembly Government barely covering inflation. They may well be tempted to charge for the use of their roads if there is the possibility of a reward. I share the misgivings of the noble Lord, Lord Cameron of Dillington, about road charging schemes.
	Clause 109 provides that the proceeds of trunk road charging schemes in Wales shall be applied to purposes relating to transport and that, prima facie, is good news. But, of course, any resulting increase in the resources available for transport purposes will probably mean a smaller reduction from the Assembly Government budget, and charging schemes may well develop into a stealthy means of raising extra revenue.
	I have one more point to make about Clause 109. The Assembly Government memorandum spells out in detail what the Assembly measure, which will flow from the clause and the grant of legislative competence, may contain. The 13 details listed range from the designation of trunk roads that will be subject to charging, to the financial arrangements for the application of revenues for transport purposes. Indeed, such is the detail in the memorandum that one is tempted to say that, with a little refinement, they could have been incorporated in the Bill. There would then be no call for an Assembly measure, which is bound to involve much work and effort at the Assembly some time in future. But then, of course, the powers would not have been devolved and that, after all, is one of the main points of the exercise and Clause 109.
	The Government may well deny the possibilities that I have raised as contentiously speculative, but they exist, are there and implicit in the proposals to allow charging for trunk road use, especially on trunks roads already paid for and maintained at taxpayers' expense. I hope that what I have said alerts the Welsh electorate to what may be in store for them, as those who logged on to the No. 10 website were obviously aware.

Lord Snape: My Lords, it is always a pleasure to follow the noble Lord, Lord Roberts of Conwy. That role has fallen to me in this House on at least one occasion and in the other place it fell to me on more than one occasion. I cannot promise to accompany him, whether by road, rail or car, on a tour of the Principality, but listening to him and to the noble Earl, Lord Attlee, the principal Front-Bench speaker, I am always struck by how adept the Conservative Party is at adopting the role of the motorist's friend in these debates. Both those speakers made great play of their support for public transport, but at the same time said that there must be no restraints on motor cars and that we cannot have congestion charging.
	One of the great weaknesses of the present charging system as far as roads and motorways are concerned is that once one has purchased a car, whether on hire-purchase or directly, and paid for the petrol, the insurance and all the other things, it does not make any sense to leave it on the drive and catch a bus. The sooner the cost of a journey is more accurately reflected in each journey undertaken, the better. If we had a system of congestion charging that made it apparent, so that there was an easy comparison between using the car and using public transport, that would help to get the modal shift that all of us say we are in favour of. However, as long as the principal opposition party sets its face against any congestion charging, that is not likely to happen.
	In my younger days in another place when I had some transport responsibilities, I used to try to write—I am going to show how impartial I am going to be in this debate—into Labour Party manifestos the provision that we should abolish the road fund licence and put the cost on a gallon of petrol, which would more accurately reflect the cost of a journey. Needless to say, most of the opposition to that proposal came from the Principality, particularly from the Swansea area, where civil servants who earned their living in the motor tax department could see redundancy looming if my preposterous—in their view—suggestion were adopted.

Earl Attlee: My Lords, the noble Lord talks some sense, but I hope that he does not forget that the principal operating cost of a motor car is the fuel, which is taxed at about 400 per cent.

Lord Snape: My Lords, if it is Conservative Party policy to reduce fuel tax, we will all be interested to hear about it. I am not sure whether the noble Earl, Lord Attlee, is senior enough or responsible enough to make that pledge, but it is very interesting that, at a time when we are talking about global warming and the cost of motoring in general, the Conservative Party should be so irresponsible as to make that suggestion. However, let us not bicker among ourselves; there is plenty of time in Committee for that.
	It is surprising that so far there has been no mention of the railway industry. If we are to have a different charging regime for local road pricing, such a regime will have some impact on the railway industry. I have a number of questions to put to my noble friend arising from those potential charges. Does he agree that local transport authorities should take account of relevant rail plans—network route plans and other plans—when devising local transport policies and plans? Does he think that they should consider how their proposals will impact on rail capacity and whether they need financially to support enhancements to the rail network in their area from the extra income that they will gain from these proposals? If local areas wish to introduce local road pricing schemes, should they not be required to consult Network Rail and the train operating companies because of the impact that such charges will have on rail carriers? If extra capacity is to be created on local rail and other public transport networks to take care of the additional traffic that will be generated from these road pricing proposals, should local authorities not be able to borrow money against the revenue stream that will arise from a road pricing scheme? I hope that my noble friend will look at those questions, as there is an opportunity for local authorities to be able to finance better public transport in their area without the burden necessarily falling directly on Her Majesty's Government's taxation policies.
	Turning from the railway industry to the impact of these proposals on the bus industry, I draw your Lordships' attention to the entry in my name in the Register of Members' Interests. Nowadays I carry out consultancy work for First Group plc and I spent many years working for the National Express Group—indeed, I was chairman of its major bus operator for some years—and there are a number of matters in the Bill on which I should like to comment and to which I will return at a later stage.
	The Bill has come about as a result of quite a few years of lobbying by passenger transport authorities and their executives. The great myth about bus passenger carryings is that it is only since the 1986 Act, which deregulated bus services, that passenger carryings have been falling away dramatically. That is not true but it is the great myth that PTAs and PTEs have tried to instil for many years. Again, there was not a great deal of defence of the 1986 Act in the speech of the noble Earl, Lord Attlee. The Transport Act 2000 and the Bill before your Lordships today arose directly out of criticism of the 1986 Act, much of it based on myths perpetuated by local authorities.
	I do not think that the average bus passenger cares who owns the buses or, for that matter, what colour they are. The average bus passenger is concerned to see that the bus arrives at the time stated in the timetable and is not held up unduly by congestion along the journey. It is an oft repeated remark, but it deserves putting on the record again, that we will never tempt motorists out of their cars if the bus that we are trying to tempt them to join is in the same traffic jam as they are in, listening to whichever radio programme they choose in the warmth, comfort and isolation of their motor car.
	The Conservative Party cannot have it both ways. It cannot say, on the one hand, that we must have no congestion charging or penalising, as it would put it, of the motorist and, at the same time and in the same breath, that we can have proper bus priority measures. The two are incompatible. To introduce proper congestion-busting bus measures we need to restrain the private car.
	Again, there is nothing revolutionary about that. It was the Conservative Government who gave permission and the financial wherewithal for the Midland Metro system to go ahead in the area that I used to represent when I was in another place. They did so on the understanding and the clear direction that car restraint measures were introduced on the adjacent A41 trunk road. That was eminently sensible and everyone supported it. But where are such sensible proposals these days from the Conservative Party? It professes to be the motorists' friend and says that there should be no car restraint, although proper provision has to be made for public transport. The two are incompatible and it is time that the Conservative Party recognised that.
	The other great myth is that London has a successful system and the rest of the country should emulate the London experience if we are to have proper bus services. The Department for Transport, or whatever it is called these days, not too long ago carried out a survey of bus passengers—surely the people who count. The DfT figures showed that 83 per cent of bus users outside London were satisfied or very satisfied with their services, whereas 78 per cent—5 per cent less—were satisfied in the capital. I need hardly remind your Lordships of the capital experience of investment. The latest figures that I have are for 2005-06, and it is costing £638 million to subsidise London buses. That may be a very good investment—I do not criticise it—but it is a bit more than the £128.6 million that the rest of the country gets. If we were to have an honest and straightforward debate about these matters, the fiscal imbalance between the two would have to be recognised. All too often it is ignored when PTEs and PTAs, in particular, demand a repeat of the London experience in their areas.
	The proposals in the Bill envisage three different ways of operating buses throughout the country: the voluntary partnerships, the statutory quality partnerships and the quality contracts. I have some trouble with the English language, as your Lordships may have noticed during the debate, but I do not understand what a statutory quality partnership is. A partnership is a partnership—an agreement between two separate bodies. How can it be statutory? The Labour Party used to demand statutory industrial agreements in the 1970s. I used to point out to the likes of Eric Heffer that there was some contradiction there. Needless to say, I did not get much change from him. I cannot see how one can make a partnership statutory.
	In any case, voluntary partnerships in various cities around the country have been extraordinarily successful. However, they need both sides to participate. The great myth that the PTAs and PTEs put around is that the only people who seek to co-operate in these matters are the local authorities. They say that the wicked capitalists who run the buses—they put me in that category at one stage; I cannot understand why—are not interested in partnership, yet I have previously during these debates drawn the attention of the noble Lord, Lord Bradshaw, to the fact that, in Birmingham, where there was a freely entered into agreement between the company of which I was chairman at the time and the passenger transport authority to provide bus lanes along the No. 67 bus route, the city council, which was under the so-called progressive partnership of Conservatives and Liberals, took out that bus lane on a temporary basis four years ago and has still not replaced it.
	It takes two to tango. A quality partnership must be a proper partnership and recognised and adhered to by both sides. In Birmingham, there are numerous examples of great growth in bus use on certain routes where proper bus priority measures have been laid down. The city of York, where there are something like 12.5 miles of bus lanes, has also seen extraordinary growth. In Sheffield, where there are fewer than two miles of bus lanes, there has been significant growth on certain routes because of a voluntary quality partnership. Growth can be achieved, but it will not be done by the imposition of statutory quality partnerships or, even worse, the protracted legal wrangling to which they will lead if the local authorities are unwise enough to introduce quality contracts.
	I am sure that we will return to many of these matters in Committee. I apologise for detaining your Lordships for so long. It is a matter about which I feel strongly. I shall underline that in Committee, no doubt much to my noble friend's chagrin.

The Duke of Montrose: My Lords, I thank the Minister for explaining the Bill to us in such detail. As one of those who did not take advantage of the briefing sessions that he provided, I am afraid that I came to this subject a little cold. The Bill contains a wonderful example of the efforts that we make to square the circle of an unequal devolution settlement between Scotland and the rest of the UK. It manages to go quite a long way towards achieving this and, during its passage, I hope that we shall be able to satisfy ourselves that it has managed, however approximately, to do so.
	I note that paragraph 37 of the Explanatory Notes states that the Bill does not contain measures that require a Sewel motion from the Scottish Parliament, but it seems that there are one or two areas where the Bill comes fairly close. Numerous permutations involving Scotland in the Bill appear to be designed to overcome any accusations that this is another area where the West Lothian question might arise. I notice that the commissioners for England and Wales will have power to act on any retained matters in Scotland, and the commissioner for Scotland will be able to act on retained matters in England and Wales.
	Most matters relating to local transport in Scotland are devolved, so it is of much interest to see in paragraph 47 of the Explanatory Notes that the Scottish commissioner will have full jurisdiction over devolved and reserved statutory functions. Does that not have a Sewel motion implication? Has any assessment been made of the burden of responsibilities that will be faced by the Scottish commissioner as compared to that of his English counterparts? Does it have any relevance to the apparent lack of powers within the Bill to appoint a deputy traffic commissioner in Scotland?
	Noble Lords will have noted that both Clauses 1 and 6 of the Bill grant sweeping, Henry VIII powers to the Secretary of State. The reasons for this being thought necessary will require a little probing at a later stage. Are there any such powers in the legislation that already governs this area, or are these new proposals?
	As the noble Lord, Lord Cameron of Dillington, said, the amendments in Clauses 46 and 47 will be seen as very welcome in all rural and remote areas, although they are also bound to benefit anyone who wishes to provide a local service in some urban community. I note that the Countryside Alliance re-emphasised in its brief for this Bill the problems of remoteness in rural areas and the fact that it is estimated that 16 per cent of rural households do not own a car, which puts them at a serious disadvantage in many areas of life. Given the current increases in the price of fuel and the fact that between 600 and 700 petrol stations in rural areas are closing every year, the number of rural households without cars may go up quite dramatically. The possibility of someone who normally runs a taxi service, which is often in the form of a minibus, being able for some part of the day to provide the format of a local bus service should be very beneficial. A similar service in the form of a post bus exists in my own area. I presume that that will be able to operate under the regulations that we are discussing.
	Part 5 of the Bill deals with integrated transport arrangements. Will the Minister enlighten the House as to how many of them are currently in existence, as they are of major importance to the convenience of the travelling public? An active arrangement exists in my home area: the Strathclyde Passenger Transport Authority has made an enormous difference, as it covers an area in which it has to co-ordinate rail, bus and ferry services. However, it has recently been presented with a further challenge. A new Scottish local transport service provided by a sea plane has just been opened up. It will fly you from the centre of Glasgow to any loch or marine destination in Scotland that you choose, and usually in not more than three-quarters of an hour. I am fairly sure that no attempt is yet being made to integrate it with the Strathclyde Passenger Transport Authority, but considering that so little regulation of air transport has been devolved, I wonder which government body will license that service. It may well at some point have to be dealt with in a Bill such as this.

The Earl of Mar and Kellie: My Lords, this transport Bill aims to do a lot of good, primarily for road congestion and bus services. I hope that it will deliver; I am sure that we will have a better idea about that by the time the Bill leaves this House. Indeed, we have discovered a lot about the Bill today.
	I shall examine what the Bill hopes to do for transport in Scotland, where, as the noble Duke, the Duke of Montrose, said, transport is largely a devolved matter. Irrespective of the future governance of Scotland, I am generally in favour of one rule of the road in the British Isles.
	Much of the Bill hangs on the future performance and independence of the traffic commissioners. It extends the changes for the traffic commissioners to the Scottish traffic area so far as reserved matters are concerned.
	I am puzzled by the fact that the new senior traffic commissioner will be able to direct the Scottish traffic commissioner to do work in England or Wales, yet deputy Scottish traffic commissioners may not be so directed. I presume that the deputy traffic commissioners will handle the devolved transport work. There is some confusion about that and its practicality, so I hope that the Minister will clarify it. In doing so, will he tell the House whether the Scottish traffic commissioner is barred from being the senior traffic commissioner?
	The opportunity to detain public service vehicles which are being operated without an operator's licence on the same basis as HGVs driven without such a licence is a welcome and useful provision. The same can be said about the use of taxis and other private-hire vehicles as public service vehicles. This deregulation may well enable small-scale public transport to be extended to isolated Highland clachans, hamlets and other villages where there is a limited but specific demand for travel to work or for a Saturday night out. It may reduce the amount of time that parents in rural areas spend ferrying the children around and make it more possible for poorer families to live in the countryside.
	The relaxation of the permits for charitable sector minibuses and the possibility of payment for the drivers, and by passengers, may well enlarge the scope and scale of that market. However, I expect that communal operators will scrutinise any expansion of such activity like hawks; perhaps fairly so.
	I have examined subsections (1) and (2) of Clause 59, which are claimed to extend to Scotland. The provisions imply a power for transport authorities and presumably local authorities in Scotland to subsidise passenger transport. Will the Minister please clarify that?
	The opportunity for members of DPTAC seems to be generous, particularly if they have to devote considerable time and travel time to their duties. However, I note that this remuneration must not apply to any devolved matters. Quite how that will work within UK-wide meetings I do not yet know.
	Another organisation to get into potential difficulties of this nature will be the Rail Passengers Council. The RPC is to get more non-rail powers. That sounds sensible, particularly when transport is to be integrated. I note that this new work will not apply to the Scottish appointees. How will that work out at meetings?
	The Secretary of State is giving herself the opportunity to charge Scottish transport authorities for information supplied under the Transport (Scotland) Act 2001. I wonder how often that will happen, or is it to stop them asking for information?
	I am content with the new powers for collecting information about foreign-owned lorries. I suspect that there may be some surprise at the roadside when the child support regulations are enforced. There is considerable concern about these lorries and this may bring them under closer scrutiny.
	Those 10 measures are the Scottish content of the Bill. Clearly, the Bill is about bus franchising, the reorganisation of the PTEs into integrated transport authorities and road congestion busting. I have a few comments about the rest of the Bill and its potential for success. The Bill aims at rural proofing. That is commendable, but it is unlikely to reach really isolated and sparsely populated areas, making it is difficult for teenagers in particular. Possibly the taxibus system will help.
	The Bill enables local authorities to install a range of road charging schemes and other congestion reducers. Without any reduction in vehicle excise duty or fuel duty, these will be seen as unfair by many. My preference is for using traffic orders and higher parking charges. Closing specific roads to certain types of traffic may well solve the congestion problem, which slows up the buses, trams and taxis. Good examples can be seen in Princes Street, Edinburgh and in Stirling where the Springkerse park and ride buses enter the city centre through private roads, involving no expensive surveillance and collection systems. If road charging has to be used, it should be used only during the peaks. Such measures are not needed in Alloa where we have free car parks which are not yet full.
	I was impressed by the Bill's impact assessment, published separately, when it looked at the Bill's outcomes for gender, ethnicity and disability. It made instructive reading.
	To be successful, the Bill will have to demonstrate that it can organise the integration of transport without compromising competition policy. That seems to be a bigger problem than it ought to be and may well defy common sense. Network Rail, in its briefing notes—I was not the only one to receive them—states that it wants to be consulted about the effect of proposed bus franchises and road charging schemes. If they are to be of any use, they are bound to have implications for the railway, so it seems sensible to make Network Rail a statutory consultee.
	Finally, I hope that the Bill will be an aid to improving local transport and will give an added fillip to public transport. A central message is that improved punctuality and frequency will lead to increased patronage. I look on with interest. Some people will not give up their cars for anything except positive coercion. Perhaps others will be prised out of their cars by demonstrably quicker bus and tram journeys. I, too, look forward to the Grand Committee.

Lord Smith of Leigh: My Lords, first, I remind Members of my various interests. I am leader of Wigan Council and, particularly in this context, chairman of the Association of Greater Manchester Authorities.
	I welcome most of the provisions of this Bill. It will greatly assist city regions such as Manchester in improving their transport facilities. Power given to local authorities is something that, as a localist, I always welcome as a sign of trust. In the process of developing a bid for the Transport Innovation Fund, we in Manchester have done a lot of thinking about the importance of transport in modern cities. Not only is it vital to allow the city's economy to flourish, but it enables communities to access the range of education, health, cultural and social facilities that make a modern city. A lack of investment in the past has created congestion and other situations which can cause a loss of jobs. In Manchester, we are advised that without the TIF bid and congestion charges there could be a cost of some 30,000 jobs in the city.
	It also badly damages the environment. When you draw a map of Greater Manchester showing the areas most adversely affected by environmental pollution, you are actually drawing a map of the main rail and road system: it is identical. We hope to get a TIF bid that will bring some £3 billion investment to public transport with road pricing, although we will not introduce road pricing until after public transport has been improved.
	I also welcome the holistic approach to transport issues that is involved in the Bill. Bringing road and public transport out of their separate silos into one integrated authority will be an improvement. I hope that we will also integrate into the approach the link to parking, not just parking in city centres. Certainly, in lots of areas there are major problems with free parking in out-of-town retail centres. They can have a huge effect on the local road network causing major congestion and we could use the income from such parking to improve public transport.
	I want to concentrate, as other noble Lords have, on three things: the governance arrangements, the bus operations and road pricing. At the moment, cities are reviewing their governance arrangements in the context of the sub-national review and the opportunity given under it for the multiarea agreements to further city development. In Greater Manchester, transport is just one of six different areas that we are trying to bring together to create new ways of governing. I welcome the terms of the Bill and what it can do for us as an integrated authority. In particular, I welcome the opportunity to involve a range of stakeholders and partners from outside the local authority. In putting together our TIF bid, we have had great assistance from the Greater Manchester Chamber of Commerce, which proofed our proposals against the effect on the local economy. That was very helpful.
	I also like the fact that we will see flexibility in the system, mentioned by the Minister in his introductory remarks. What we want in Greater Manchester may not be what people want in other cities, and that is fine. We can have a system that we want, which will bring in partners—transport operators, users and industrialists who can make a contribution. I can assure the noble Lord, Lord Bradshaw, that PTAs are not precepting authorities; they are levying authorities. Whatever they want to do needs the approval of the local authorities. Believe you me, later this week we are having a scrutiny of the Greater Manchester transport budget bid for next year and I assure him that it will come down. The relationship with highways authorities needs to be clarified. I am sure that we can do that in Committee to see how much influence local authorities can have over the Highways Agency—an important agency in contributing to transport issues.
	On bus operators, the role that buses play in cities is not fully recognised. My noble friend the Minister quoted them as having two-thirds of public transport journeys; they are very important in cities, where it is probably as high as 80 per cent. The experience of public transport in cities, particularly in bus operation, is very different in different parts of the country. I am sorry that my noble friend Lord Snape has just left his place, because one of the treasures of your Lordships' House is that there is always somebody to defend an interest, however oppressed it is. In his robust and entertaining speech, my noble friend defended bus operators. Well, there you go; somebody has to do that. Yet when you look at the reports on their financial dealings and the profits that they make, I prefer to defend the interests of bus passengers. They are getting a raw deal—particularly in urban areas outside London, which suffered the consequences of deregulation.
	Despite what my noble friend said, the figures on what has happened are quite stark. During the past 20 years, since deregulation, bus fares have risen in London by 50 per cent while patronage on the buses has risen by 57 per cent. In other urban areas, operated through deregulation, bus fares have risen by 100 per cent but passengers have fallen by roughly 50 per cent. That is a really different experience from what is going on here, which can be explained by no reason other than the impact of London still having a regulated bus operation. Transport for London and the Mayor can therefore decide all sorts of things such as routes, timetables and fares—even the colours of the fleet. It seems to me that we should not have gone away from some of that in the deregulation of 1986.
	I think that one reason for this Bill being before us today is that delegates to the 2006 Labour Party conference had an opportunity to see first-hand what was happening in Manchester's Piccadilly, where there was a queue of bus after bus after bus—all with their engines operating, and therefore polluting the city centre. There were an unbelievable number of rival buses trying to pinch passengers, and that just does not work. It is costly to the bus passengers, as we saw.
	I hope that we are trying to get quality partnerships in Greater Manchester, but quality contracts are important. I will not repeat the points made earlier by my noble friend Lord Rosser, but the Bill proposes a complex way in which quality contracts should be implemented. That has to be a serious and relatively straightforward alternative to the quality partnerships regime, if only to get the bus operators around the table in a serious mood to agree to a proper partnership. I hope that we can make some amendments there. In the bus parts of the Bill, I also welcome the ability for transport authorities to own their buses. That could make an enormous difference to those community bus services that require a high degree of subsidisation, and which are so vital to many of our communities.
	Finally, on road pricing, I still bear the scars from the proposal to introduce congestion charging in Manchester as part of our TIF bid. Clearly, no one is willing to pay any more tax for using a car, so how did we manage to convince the majority—two-thirds of the public and of the business community—to support the TIF bid? We made sure that they understood that, for a number of reasons, the congestion charge was not a tax. First, there is a choice: motorists do not have to pay a congestion charge in Manchester if they choose to change the mode of travel. Clearly, that encourages people who can do that. Secondly, they can vary the time of travel; we are introducing a peak time congestion charge system, which is doing what it says in charging motorists for the congestion that they create during peak periods. In non-peak periods, there is no cost and it would therefore be wrong to charge them, so if they change the time of travel then they will not pay. The revenue that would be raised from such charges will be reinvested in improving local transport, and people recognised and understood that.
	On the question posed earlier by the noble Lord, Lord Cameron, about the benefits to the rural community from a community charge, it is simply that the money will be going to improve public transport—including things like park-and-ride so that people who live in rural areas can travel to the nearest station, park up and use the train or a bus to travel into the city. There are thus opportunities and benefits there, and we will make sure that there is considerable investment in railways as part of the package of improvements to public transport—in both stock, to improve capacity, and in stations, to make sure that they can handle that extra capacity. We will talk to Network Rail and other rail operators to ensure that that happens.
	If we are trying to improve lives and opportunities in our cities, transport is now such a vital element that it can no longer be ignored or left on the back burner. I welcome the Bill as a great way forward, and I look forward to working to try to improve it in Committee.

Lord Marland: My Lords, there are many areas in this Bill that we all seem to favour. There are, however, pitfalls that do not recognise the investment and commitment that transport businesses have made to the industry or the huge improvement in services.
	I am afraid that greater regulation via a quality contract and a PTA will not improve the system. It is therefore palpably flawed. Undeniably, the best transport infrastructures in Britain are in York, Cambridge and Brighton, which, despite initial controversy, shine like beacons. Why? It is because each has a unitary authority, which determined an integrated traffic management system, recognising the coexistence of buses, rail and bicycle and the equal importance of the car. I note that the private car gets a mention only in the last quarter of this Bill. Unitary authorities are, therefore, a proven success in which, if created with a quality partnership—partnership being the operative word—public and private entities can successfully recognise each strength and weakness for a common aim.
	Since time immemorial, it has been demonstrated that the Government or the public sector are no managers of businesses, particularly substantial ones such as the transport industry. Many transport companies have become significant multinational businesses, and I fear that some of this legislation treats them as if they were small-time operators. The quality contract is, I am afraid, therefore flawed. It provides greater regulation and greater cost to the taxpayer, potentially jeopardising investment by operators who fear that, at a whim, contracts may be awarded to alternative operators if it is politically, and not necessarily commercially, expedient. I share the CBI's concerns that no compensation scheme is provided if that occurs, and I have asked the Minister to look into that.
	Of course, we need regulation to ensure that targets are being met and that safety standards are being adhered to and there is no reason why that should not be done by a senior traffic commissioner, as is proposed. Yet he must have the independence to marry the political and commercial influences on his decision-making, so I agree with the noble Lord, Lord Bradshaw, that such a job specification and remit needs to be carefully considered and crafted. A nationwide code of conduct through that regulator is, surely, the fairest blend between commercial and political influences, to ensure that the general public have best practices and value for money. We all support joined-up thinking that develops an overarching plan, embracing all forms of transport with the highway authority at its side. We must ensure that we combine private and public sectors, operating together, as that is the only way forward. It can be done only through a quality partnership, not through quality contracts.

Viscount Simon: My Lords, I happened to be watching a television show last weekend in which the Secretary of State for Transport was being interviewed. I did not see the complete interview, but what I did see included some matters relating to this Bill. The Secretary of State said that people would be given "a choice" of the transport that they might use, but for many people there will be no choice. There are the tradesmen, travelling salesmen, taxis, delivery services, to mention but a few—and then there are the people who cannot afford to use public transport. If they are forced off the roads and cannot afford to travel by bus or train, businesses will suffer as well as their own cash flow.
	How about blue badge holders? I should declare that I am one. Will they be charged or will they be exempted from any form of charging? How will a local authority know that they are exempted if it is the intention for local authorities to have their own list of exempted drivers? During Question Time today I received a letter from the Minister of State, who wrote,
	"currently, we have not given specific guidance to local authorities, beyond noting that any proposals on discounts and exemptions, including for disabled people, should be justified against the objective of the scheme and the cost implications understood".
	Does that mean that in some areas blue badge holders will be charged while in others they will not? This seems totally bizarre. How would a local authority know that a particular vehicle was being used by a disabled driver? Equally, how would such a driver know that they are entering a location where charging takes place? Would charging start on a dual carriageway where a driver cannot turn around and avoid it, as happens in Singapore? Would it not be easier for a national register to be set up so that local authorities would know who to charge and who is exempted? In the case of disabled motorists, the register should include the name of the holder of the blue badge, the duration of the exemption, a photograph of the holder and the index number of the vehicle used. In her letter, the Minister of State concluded that there will be an announcement soon within the context of blue badge reform, and I look forward to learning more about this.
	I hope that I am not being too simplistic in thinking that the driver of a company car will pass any charge on to the employer if driving is not a part of that person's employment, or that a company will pay the charge for all their employees. How will local authorities deal with foreign-registered vehicles? I am led to believe that at any one time there are 140,000 such vehicles in this country and some of them will, I am sure, be driving in towns and cities which will introduce charging. How will such a driver know about charging? I was pleased to hear my noble friend mention that anomaly in his opening speech.
	With those cars owned by people who cannot afford to continue driving off the roads, congestion will be reduced, leaving roads clearer for the drivers who are not concerned about the cost. Maybe I am being cynical, but this Bill appears to pay lip service to the poor while encouraging the financially sound to continue motoring. After all, fares on public transport, including the trains, have increased so much over the years that people have been forced to drive as they are unable to afford the fares. Should fares remain the same or be increased so that more and more people are forced on to the roads or should they be heavily subsidised to attract people back on to public transport? If roads become increasingly congested, those people who are adversely affected by longer delays will be forced to seek alternative ways of reaching their destinations. Many people have schedules to adhere to and an increasing number of them will find that public transport is more reliable than the unknown delays imposed on drivers of other vehicles due to congestion. My noble friend referred to the problems being investigated that have occurred between the Department for Transport and local authorities in delivering various improvements. I am glad to hear that that is so.
	Those who live in rural areas need public transport in exactly the same way as those who live in urban parts of the country, as many noble Lords have said. Because population density is lower and distances are greater, people have to rely on their cars for transport because public transport is available less frequently. In some areas, bus services have been cancelled, leaving the passengers to drive cars. Subsidies, as I have already mentioned, will be required to keep such services running, otherwise no operator will be prepared to run at a loss.
	I wish this Bill well and leave my noble friend with one final thought. Has any consideration been given to nationalising public transport?

Lord Glentoran: My Lords, like my noble friend Lord Roberts of Conwy, I shall concentrate almost solely on Clause 109 and the Welsh issue. The noble Lord, Lord Roberts, recently handed over to me the baton of looking after our Welsh friends after a large number of years—I cannot remember exactly how many—involved in Wales and Welsh politics.
	I want to draw the House's attention to Clause 109, although I have to say that it is very questionable whether this clause should be before this House at all, for it seems to me that the it creates new powers of taxation for the Welsh Assembly—and, as your Lordships know, in this House we do not debate taxation.
	The clause allows the Welsh Assembly to introduce a Wales-wide road-pricing scheme, which is effectively a new tax on Welsh motorists, Welsh farmers, Welsh hauliers, and Welsh tourism. What assessment have Ministers made of the potential effect of this measure on the Welsh economy? There is an enormous gap between local congestion charges and a general power to tax all Welsh motorists. Obviously, if we are to have local congestion charges, it makes sense for trunk roads to be part of that scheme, as the law currently allows. But making general provision for a Wales-wide scheme is of a different order of magnitude.
	We are told that the Welsh Ministers have yet to decide what role, if any, road-pricing should have in Wales. Would it not have been preferable, or indeed more sensible, if Ministers had thought through what use they may or will make of these powers before we are asked to transfer them? It is not abundantly clear that the Assembly will use these powers to the full. At present the Assembly, unlike the Scottish Parliament, has no powers of taxation. Had the Government wished the Assembly to have tax-raising powers they could have put that to the Welsh public at the referendum, but they did not—and we should remember the result of that referendum. To give the Assembly tax-raising powers would be a major constitutional change and should be subject to another referendum, not slipped through as part of a fairly irrelevant Bill. Instead, the Government seem to be giving the Assembly stealth powers to levy another stealth tax.
	The money raised from a Wales-wide road-pricing scheme is not restricted to paying for improvements to roads, or even for public transport in the immediate vicinity. Will the Minister confirm that this provision would enable the money raised to be spent on Welsh Ministers' official cars? The only restriction on the use of this money is that it must be spent on transport, but if the Welsh Ministers could effectively fund their transport spending from a Wales-wide road-pricing scheme, they could transfer the money from the block grant that they currently spend on transport to other uses. Any ring-fencing in this clause simply dissolves; it becomes a general power of taxation.
	I am also concerned about how we are now asked to transfer these powers, especially, as your Lordships should know, since there are three more examples of this sort of power sliding coming before us in other Bills. Only last year we passed new legislation setting up a method—admittedly a rather labyrinthine one—for the Welsh Assembly to gain new legislative powers. It is an open, Assembly-led process in which the elected members request new powers, and Parliament can then decide whether to transfer those powers to the Assembly. Why are the Government not using this process now?
	Instead, the Explanatory Notes tell us that it is the Welsh Ministers, not the Assembly, who have requested these powers. Having laid out an open, transparent process for transferring powers, we are now faced with a deal thrashed out behind closed doors between Welsh Ministers and government Ministers in Whitehall. That is not a good way of legislating—in fact it is a very bad way of legislating. Perhaps the Government can also tell us why they are giving Welsh Ministers the power to create a Wales-wide road pricing scheme when we are assured that Ministers have no intention of creating a nationwide scheme in England. Is this a stalking horse for a national scheme of road pricing? We suspect that it is.
	It seems that we are effectively laying the foundations for a general levy on Welsh drivers. As the noble Lord, Lord Roberts, pointed out, this could have enormous repercussions for the Welsh economy and on the Welsh state and wealth. Yet we are asked to sanction a general transfer of powers when the Welsh Ministers cannot or will not say how they intend to use it. We do not support this part of the Bill.

Lord Bradley: My Lords, I apologise to the Minister for not being in my seat at the beginning of this debate. I was unavoidably delayed in Manchester but would like to stress that it was not because of the transport system. I also therefore apologise for repeating anything that was raised in the debate when I was not present.
	I give a general welcome the Bill. In cities such as mine in Manchester the public will welcome any steps that are taken to address the chaos on some of the main roads into the city; they are particularly pleased that the Bill provides transport authorities with greater influence over bus services and the enhancement to existing passenger transport authority powers. They are also pleased that the Government's proposals in the Bill broadly strike the right balance between strengthening the remit and the role of passenger transport authorities—to be renamed integrated transport authorities—in planning and delivering the strategic priorities for a city region such as Greater Manchester while allowing each city region to determine how best the right balance between local circumstances and aspirations can be achieved. I pay tribute to the work of Greater Manchester Passenger Transport Authority in trying to achieve this under the current circumstances.
	However, in this brief contribution I will concentrate on a number of issues relating to buses which, through sensible amendment, will further strengthen the Bill. As we have heard, the bus is the main form of public transport. Yet, outside London, bus use has been in decline. This Bill rightly attempts to tackle this by making changes to the way in which voluntary and statutory partnerships can be introduced and operated; bringing in a new process of franchising networks; strengthening the role of traffic commissioners in enforcing better punctuality; and making provision for a new passenger watchdog. I would like to touch on some of these points as they relate to buses.
	The first point concerns quality partnerships. I welcome the opportunities afforded by the Bill for authorities and bus operators to form more extensive, voluntary and statutory quality partnerships by amending the competition test in an attempt to encourage the development of more collaborative partnerships. While I welcome the retention of the ability of authorities to set and revise frequencies, timings and maximum fares as part of the statutory quality partnership, it is notable that the Department for Transport seems to have diluted the proposals in the Bill in so far as operators can challenge improvements with regard to frequencies, timings and so on, by making admissible objections.
	I understand that regulations are to be drafted that will define admissible objections. The criteria that will determine admissible objections are currently unclear. I would welcome the House having early sight of regulations which will presumably define these in due course. I hope that the Minister can assure us on that point. Further, the criteria should require objective and evidenced submissions by bus operators such that admissible objections can be properly judged in light of the public interest. It is also unclear who will make the decision about whether an objection is admissible. If it is an independent third party such as the Traffic Commissioner, we will require an informed understanding of the wider public transport context in order for such decisions to be appropriately made.
	My second point concerns quality contracts. These already affect the franchising of a network of services similar to the way in which the majority of the rest of public transport in the UK is provided, such as bus services in London and the national rail network. However, there are considerable practical obstacles to the introduction of quality contracts, not least of which is that the incumbent operator usually has control over garages, the staff and the buses and if they fail to win the quality contract competition they are under no obligation to hand them on to the winning bidder. Such practical difficulties can be overcome if passenger transport executives or authorities are able to invest in modern depots and services in the process of awarding quality contracts.
	Further, the process outlined in the Bill for an authority to secure quality contracts is still very time consuming with the potential for an elongated appeals process. These decisions should be taken at a local level by local authorities as elected representatives of their local communities instead of being delegated to external, unelected bodies, such as approvals boards or Transport Tribunals as the Bill currently outlines. I hope that the Minister will further consider this point in terms of decision-making.
	The Bill does not fully address the need to protect passengers, taxpayers and bus workers in any transition from the current situation to quality contracts. The Bill does propose that TUPE will apply in so far as the operators of a quality contract wish to take on staff from previous incumbents where their pay and conditions will be maintained. However, that guarantee is not written into the Bill where the bus operator may not want to transfer staff in the numbers that are currently employed or within the terms and conditions that they currently have. That needs to be carefully looked at.
	The Bill makes provision to strengthen the enforcement powers of traffic commissioners with regard to improving the general punctuality and reliability of bus services. It also permits them to reject registrations to run new services in quality partnership areas in the light of criteria provided by the local authority. However, the Bill does not address the issue of increasing both the resources and the skills level of traffic commissioners in the light of those additional responsibilities. It is essential that they be trained with appropriate resources if their role in the process is properly recognised and valued.
	I welcome the move in the Bill that enables passenger transport authorities or executives to own bus vehicles, which should permit greater competition on subsidised bus services and their tenders.
	In conclusion, I greatly welcome the thrust of the Bill. When we move sensible amendments in Committee, we can strengthen the arrangements further to ensure that cities such as Manchester have the bus service that they deserve and clearly want.

Baroness Scott of Needham Market: My Lords, during the dying days of the previous parliamentary Session, I spent many hours in your Lordships' House dealing with the then Local Government and Public Involvement in Health Bill. I found it a fairly dispiriting experience, because I disagreed with almost everything that the Government sought to achieve in that Bill, so it is a relief to discuss a Bill on which I am fundamentally in tune with what the Government seek to achieve. I would like clarification on some issues today, and to introduce some thoughts that might not have occurred to the Government.
	Until July, for six years I was a member of the Commission for Integrated Transport, and was involved in producing a report last year looking at the whole question of transport provision and governance. Having taken evidence from around the country and talked to many people, we came to the conclusion that the failure thus far had been because there was not an effective sub-regional tier of decision-making for transport issues. Existing regions are too big, and local authorities are on the whole too small. The Bill goes some way to address that, although it misses out on the most fundamental point—how money is raised. This is not a time to go into detail about local government finance, but it seems a crying shame that we are so centralised that the great cities of this country such as Manchester and Liverpool have to go cap in hand to government, year after year, to fund the transport projects that they believe are right for their areas.
	I wish to concentrate on the impact that the Bill will have on local decision-making, because there is certainly quite a patchwork of systems across the country. Responsibility for particular areas of transport lies in different parts of local government. My main experience is in shire counties such as Suffolk, where I was a councillor for 15 years. There, most transport responsibilities sit with the county council and the system works pretty well, although the fact that off-street car parking and concessionary bus fares lie with the district council causes problems from time to time. The real issues are in metropolitan areas—the sort of areas covered by Transport for London and the PTAs—where the split responsibilities have been much more problematic, with public transport in the remit of one group of people and the highway network in the hands of another. It is certainly evident that, across the country, the areas where the most progress has been made—not just with public transport, but in the likes of walking and cycling—are those served by unitary councils. Places such as Brighton, Reading and York all spring to mind. All the levers of decision-making and policy there lie in one set of hands.
	In many of the areas covered by the PTAs, we have reached an impasse. Bus operators are saying that they will not invest any more in quality until the highway network is changed to give bus priority and is upgraded. Councils are refusing to put in bus lanes until the bus operators improve, and the PTAs are stuck in the middle, trying to improve the service for their passengers and finding that they are unable to do so. The noble Lord, Lord Rosser, explained well how difficult it would be to achieve a quality contract under the current arrangements, because the legal hurdles are now so difficult. The noble Lords, Lord Snape and Lord Marland, do not think that quality contracts are a good idea anyway. I do not propose to get into that debate but, until we sort out the question of responsibility for the highway network, it will be difficult to improve bus services even to the point of a quality partnership. Until we get the partnership right, we certainly cannot think about moving on to contracts.
	I welcome the provision for the new Integrated Transport Authorities to have powers to deal with the highway network in their areas. That will make a fundamental change. However, I hope that the noble Lord can clarify something from the Bill for me. I am not clear on whether the new ITAs will automatically take over highway powers or whether there has to be a review before they can do so. I would appreciate it if he could clarify the timetable for the reviews. As we heard from my noble friend Lord Bradshaw, we cannot deal with congestion until the question of highway powers is sorted out.
	There will always be conflicts between a local perspective and the more strategic perspective of the PTA. Both points of view are perfectly valid; the question is about how you arrive at a system where both sides can be heard but that does not stop progress. I welcome the strengthening of the PTAs by turning them into Integrated Transport Authorities, and particularly by giving them the general power of well-being and the provision to alter their boundaries and create new transport authorities. How will the reviews be carried out? Will they be from the bottom up—at the request of local areas—or directed by the Secretary of State? How will he avoid destabilising the existing arrangements? We have to remember that PTAs have complicated arrangements for contracts, often stretching many years into the future. For example, Merseytravel operates not just buses, but ferries and the Mersey tunnels. It even has its own train set.
	I have a few questions about the governance of the new authorities. If the noble Lord does not have time to respond today, I hope that he can write to me. How will the transport plans drawn up by the ITAs fit in with other planning documents such as local development frameworks? Will local plans have to fit in with the strategic vision, or will the strategic vision be some conglomeration of the local plans? How will the new ITA structure fit in with the local strategic partnerships, which are such an important part of local authority governance now? Those bodies will be the ones that agree targets and funding with the Government, and it is important that we understand how the new ITAs will fit in with that. What will the relationship be between the ITAs and the emerging regional agenda and multi-area agreements? Beyond that, how will ITAs work with national transport providers such as Network Rail and the Highways Agency?
	I would also appreciate some comments about the governance of the new bodies. Can the noble Lord assure the House that the constituent parts of ITAs—the local authorities that send representatives to them—will continue to be party-politically balanced and to run their own governance arrangements, and will not be forced to go down the route of local authorities and have a single person with all the executive power? Can he explain how the Government think that the non-elected nominees to those bodies will be chosen? If an ITA wishes to bring in stakeholders from its area, that seems fine and a matter for it, but having nominees imposed by the Secretary of State would be a step too far. Will those people be allowed a vote when they are on the ITA? Given the not insignificant levy that the PTAs and ITAs will be setting—not precepting—on constituent local authorities, it is important that the people who do that are in some way democratically accountable.
	For someone who comes from a rural area, it seems to me that the Bill's provisions will do very little for transport and public transport in rural areas, which is a problem. The big difference is that in rural areas public transport is about accessibility, not congestion or the environment. It is about the quality of life for the significant minority of people who do not have access to a car, and unfortunately the Bill does not address that.
	I do not share the concerns that have been expressed by some noble Lords about congestion charging in rural areas. Whatever we feel about congestion charging, it will be enormously controversial and no local authority will undertake it lightly; its political future will depend on that. I cannot imagine a situation in which a rural local authority would introduce congestion charging on rural roads other than perhaps in, for example, national parks where there might be some issues of overuse. Beyond that I cannot see that noble Lords need worry about congestion charging or road-use charging in rural areas. The key to getting this right is ensuring that public transport improvements extend into the rural hinterlands so that residents of rural areas do not feel that they are paying for improvements that go only to improve life for people who live in towns.
	I hope that the Minister will be able to answer at least some of the many questions I have asked, but I am happy to receive some answers in writing. I look forward to the Committee stage.

Lord Hanningfield: My Lords, I am pleased to be able to speak at the end of such an insightful and well-rounded debate. I thank my noble friends Lord Attlee, Lord Roberts of Conwy and Lord Glentoran for their contributions, particularly on the Welsh question, which I hope the Minister might be able to answer tonight. That is something we are very concerned about on this side of the House. I thank my noble friend the Duke of Montrose for his contribution on Scotland and my noble friend Lord Marland for his contribution.
	The consensus on the objective of the Bill is clear. We all appreciate and understand the need to reform transport and tackle congestion. That much is evident. It is, of course, the detail that is questionable, as we have discussed today, and we shall be debating that in this House over the next few weeks. As leader of one of the largest local authorities in the country, I am acutely aware of how the local transport debate has evolved of late and of the pressing concerns we face. I shall approach our debates on the Bill from that perspective.
	Speaking of the general tone of the Bill, I would contend that under the guise of pro-localism the Bill is promoting a selective form of devolution that serves only to pass down to local authorities those powers the Government might feel were politically unattractive for themselves. It is interesting to observe that most of the devolutionary proposals seem to focus on removing the Secretary of State's involvement, rather than allowing the full remit of powers to be brought down to the local level. As one or two noble Lords have said today, while local authorities are unable to raise money locally, local decision-making will always be taken to a national level anyway. Bringing powers down to the local level would much more effectively tackle the issue of transport and congestion, bringing with it the benefits we are all aiming for.
	With regard to road pricing, little is mentioned on other forms of tax. I shall talk about that later. Since within the Bill lies the acknowledgement that decisions regarding transport are best decided locally, surely there is a case for the administration of existing road taxes also to be devolved. Again, I shall talk about that later. Devolution cannot be used as a tool when it suits; that serves to undermine local government. I am confident that local authorities could do much more, and do it more successfully, if the handing down of powers were full and rational instead of the patchwork mosaic suggested.
	My authority, Essex County Council, in one way or another spends around £70 million a year on transport, including subsidies, school transport, transport for the elderly and all sorts of transport in the county. That includes a £7.5 million subsidy for bus routes. With increasing cost pressures, the modern local authority is conscious that funds cannot be spread liberally. I for one would prefer to be given the ability to get the best result I could out of that figure, and I would like legislation to enable me to try. It is unfortunate that the Bill does not go far enough in allowing us to achieve that.
	I welcome the discussion of community transport in the Bill. The noble Lords, Lord Bradshaw and Lord Cameron of Dillington, mentioned this element of rural transport in particular. Done properly, reform could be achieved with community transport helping to reinvigorate rural communities where commercial bus services are not viable. After all, increasing patterns of public transport usage are what we are striving for. For example, if we combined community transport with school transport, transport for the elderly, bus services and all sorts of other services, we would really get value for money. We will be seeking to refine the Bill's proposals in this area in Committee to see what can be achieved.
	The punctuality monitoring regime put forward by the Bill is sensible. Both operators and local authorities should be held responsible for the quality of services. Punctuality is one of the main determinants of the perception of a local route, and has the ability to turn potential passengers back to their cars. Reliability is very important for buses, and that will be even more noticeable if there are going to be more people using them.
	What the Bill neglects to consider, however, are the other factors that turn passengers away from using a bus service. Currently, a change to a bus timetable requires a 56-day notice period in England, yet in Scotland a full 70 days need to be given. During the consultation period it was suggested that England's requirement should be increased to match that of Scotland, with restrictions placed on the number of permissible timetable changes. It may be sensible to place some minimum conditions on the length of time new operators intend to run a new service. Such measures would help to reinforce and revive the public's opinion of, and confidence in, their local services.
	The partnership approach has worked well alongside the deregulation of bus services, and additional measures to strengthen that and increase uptake are to be welcomed. I agree with the view expressed by many today that franchising is not required for a local bus system to be successful. However, the proposals concerning partnerships will need to be refined for benefits to be maximised. As it is, there is no clear factor that would compel bus operators into agreeing to the maximum fares, timings and frequencies that are proposed. The definition of "admissible objections" needs to be tightened.
	If a partnership is truly to function, there needs to be recognition and respect of the arrangement across the board. The unfortunate situation at present is that local authorities and operators have sometimes been forced into unnecessary opposition. An example of this can be demonstrated by the lack of clarity surrounding the new concessionary fares framework, which the noble Lord, Lord Bradshaw, mentioned at the beginning of the debate and which we all support. It starts from next April. However, the guidance from the Government is still inadequate on how reimbursement will operate. Such factors undermine the success of co-operation. Perhaps the Minister can let us know about that.
	The proposals in the Bill on reforming transport governance are to be welcomed in their nature. My counterparts in metropolitan areas will be especially glad of the change, and we have heard several contributions today that mainly support that. For too long the rules around governance have been stiflingly inflexible; they stand in the way of what is often logical. Initiating a review of local arrangements should indeed come from the bottom upwards, with the implementers of change deciding on how their arrangements should work without the direction from the centre being overly strong. In addition, the potential implications of allowing non-elected persons to be members of an ITA require further investigation about their specific role. I agree with all the questions on governance just raised by the noble Baroness, Lady Scott of Needham Market. I hope that the Minister will reply to those questions—if not today, then in writing—because who we place in those roles is important. The amended role of traffic commissioners, as proposed by the Bill, needs to be scrutinised in order to ensure that their position is justified and that they are not merely unelected replacements for the Secretary of State.
	Evidently, road pricing could potentially be an effective tool in reducing congestion on our roads—many noble Lords have mentioned that today—particularly in areas such as Manchester and other big cities. I again agree with the noble Baroness, Lady Scott of Needham Market, that it is not ever going to happen on rural roads. With a national scheme not forthcoming, it appears that local road pricing has been pushed forward to allow central government all the benefits of observing a trial scheme without any of the political responsibility. Some noble Lords referred to the delivery of nearly 2 million signatures to Downing Street illustrating the sensitivity of such an introduction; I have reservations regarding the motivation of the Secretary of State's approval role—as it has been removed. In addition, local people need to play a role when deciding if a charging scheme suits their area. In Committee we will explore options on how the public could be consulted—whether in the metropolitan or urban area or the rural areas around it—such as referendums or other consultation options.
	The measures in the Bill are ostensibly locally driven. However, should the level of transport grants and the like be phased out, one can imagine a situation where local authorities could be coerced into charging on their roads purely for financial reasons. All Governments, I am afraid, have introduced new ideas, saying, "You can raise money by doing this", and then removing it from the revenue grant that we get locally. Perhaps the Minister will reassure us on that point. Similarly, the role of the Transport Innovation Fund, as a potential lever for central government to encourage charging schemes, undermines the local decision-making process. That should not be the case.
	I would contend that the biggest indicator of whether a road pricing scheme is likely to be a success appears to be whether it is perceived as a stealth tax by the public—as mentioned by one or two noble Lords today. Little mention is made of the implications of road charging for other forms of road taxation, or of how the total cost of motoring is to shift. I would suggest that if other forms of taxation were in local authorities' hands, a more balanced and informed decision could be reached on the road-charging debate. For instance, as I have proposed several times, vehicle excise duty could be localised. A brief consultation of Department for Transport statistics demonstrated that around 700,000 cars were licensed in Essex last year. That money would go a long way towards improving our roads and would be a local form of taxation. The public would see that they were getting something for their investment.
	In a similar vein, both authorities and the public require transparent information on how road pricing is to function alongside tolls. I am a supporter of tolls on roads—we have proposals in Essex to construct a toll road. No mention is made in the Bill and I would like the Minister to comment on tolls and road pricing. I also remain unconvinced that more than one charge on the same road is fair or acceptable. For the same reason, the allowance in the Bill for London authorities potentially to place more than one charge on a road will require further examination.
	As I said at the beginning, we have had an interesting debate. There is general agreement that the Bill—in the right way—could be helpful and improve matters. The points raised merit further investigation if we are to produce effective legislation. I look forward to continuing the debate in Committee, where we can look to improve the areas highlighted in discussion today.

Lord Bassam of Brighton: My Lords, I start with a general thanks to all the noble Lords who have taken part in what was a lively and interesting debate. The noble Lord, Lord Hanningfield, expressed it well when he said it was a well rounded and interesting discussion. That was certainly true.
	We have had some impassioned contributions on subjects ranging far and wide: quality partnerships and quality contracts; I thought I heard a plea for nationalisation at one point; concerns about road pricing in Wales, particularly from the noble Lord, Lord Roberts of Conwy, and the noble Lord, Lord Glentoran; issues about the power of traffic commissioners and, quite rightly, about governance matters in the new ITAs; and some powerful pleas for rural areas, notably led by the noble Lord, Lord Cameron of Dillington, about giving fair consideration to better access to transportation and being mindful of the potential impact of systems of road pricing. We had powerful contributions too from the noble Lord, Lord Smith of Leigh, with his insights into good governance and transportation matters in Manchester and, similarly, from my noble friend Lord Bradley, based on his time representing Manchester constituencies and his involvement in local government.
	We also had concerns expressed about matters well outside the scope of the Bill, such as concessionary bus fares. We had pleas from my noble friend Lord Snape—good knockabout stuff—about consultation with Network Rail. However, Network Rail has made those pleas itself, and aggressively so—quite rightly and properly. My noble friend Lord Rosser raised the issues of TUPE, traffic commissioners and so on. I shall pick up on some of those comments and observations during the time I spend on the points raised. The noble Duke, the Duke of Montrose, Scotland's very own watchdog, made some good points and asked some helpful questions. I cannot hope to cover every question raised; I was encouraged that noble Lords were realistic about that prospect. I will endeavour, as best I can, to respond to some of the main points raised during the afternoon. I do not just recognise the importance of the points, but understand their significance for later stages of the Bill.
	In general, not only was the debate constructive, but the Government received some plaudits. The noble Earl, Lord Attlee, described the Bill as having laudable aims—from the Conservative Benches, that is probably praise. The noble Lord, Lord Bradshaw, a great friend of public transport, was generally encouraging about the Government's approach, as was the noble Baroness, Lady Scott of Needham Market. I think that we are in for a constructive debate as the Bill goes through your Lordships' House. The degree of support for the Bill's broad aims and approach came from all sectors, reflecting in large part the contribution already made during the process of public consultation and pre-legislative scrutiny.
	A number of noble Lords expressed their support for the Bill's focus on empowering local authorities—the noble Earl, Lord Attlee, and certainly the noble Lord, Lord Bradshaw, did exactly that—and on the Government's desire to devolve greater responsibility and discretion to the local level. The noble Lord, Lord Hanningfield, described that as being a degree of localism. If that is the case and he sees it that way, that is all to the good, because that is how the Government see it. That is a key feature of many of the provisions in the Bill, which generally fits with the Government's wider approach to local government. In our terms, that represents a real contrast with the approach adopted in some previous legislation, particularly with passenger transport authorities. I am pleased that the change is welcome in your Lordships' House and is being perceived as such.
	Noble Lords have raised a number of points which fall outside the scope of the Bill but which are very important. The Government have taken a conscious decision to focus the Bill specifically on the linked aims of improving public transport and tackling congestion at a local level because we see action at a local level as being the most effective. In doing so we recognise that the Bill is only one part of a much wider package of measures to improve transport across the country. The Bill is not, and does not purport to be, the solution to all of the nation's transport challenges.
	I now turn to the specific questions, as the House deserves some answers. I found the questions very helpful and I want to answer as many of them as possible. In general, Conservative Members—I hope this is not seen as unfair—in expressing support for the Bill, were not happy about quality contracts. Noble Lords are quite entitled to take that view; I happen to take a contrary view. The noble Earl, Lord Attlee, started that debate. On quality contracts, in many places bus services are not being delivered satisfactorily, despite the best efforts of operators and local authorities. Where local authorities have the resources to develop quality contract schemes and where there is public support for them, we believe that option should be made available. Obviously, we hope that the Bill will encourage a more effective use of partnership arrangements, which, it is fair to say, received a great deal of support during the debate.
	On quality partnership schemes, the noble Earl, Lord Attlee, and the noble Lord, Lord Bradshaw, made points about the admissible objection from relevant bus operators and asked what kind of assurances we can give that that is not a device to make it difficult to establish quality partnership schemes. The intention is not to make it difficult to establish a quality partnership scheme; the intention is to ensure that local authorities cannot impose requirements on bus operators are that unrealistic or unreasonable in relation to frequencies, timings or maximum fares. However, we agree that we must not give bus operators carte blanche to veto any proposed scheme that comes forward. That would be self-defeating.
	The noble Earl, Lord Attlee, made the accusation that we were trying to distance ourselves as a Government from road pricing and that we were trying to put a gap between the Secretary of State and the development of schemes. It is right that decisions on local road pricing schemes should be matters for local authorities and the communities and should not be diktats from central government because any scheme will be aimed at tackling local problems. The noble Baroness, Lady Scott, made the point that there is unlikely to be much congestion in rural areas and that it is an issue for urban areas. That is precisely why we think that working up schemes is best left to local authorities, such as those in Manchester, so that we can have effective traffic and transportation management.
	The noble Earl, Lord Attlee, made the point that it is crucial that local arrangements for governance reform avoid unnecessary interference. The Bill makes it clear that the emphasis is on local areas carrying out their own review of transport governance and on identifying what changes they think are needed so that locally matters can be dealt with effectively. The noble Earl also made the point that local authorities should be required to consult; we certainly agree that consultation is very important. We would expect all authorities considering introducing a charging scheme to consult fully on any proposals that they seek to bring forward.
	The noble Earl and a number of Conservative Peers, notably the noble Lords, Lord Roberts and Lord Glentoran, made the point that road pricing is a form of stealth tax. That is a very narrow consideration of the issue. Road pricing and congestion charging have been proven to work in London. Clearly, it is for other local authorities to try to make use of that in similar ways so that money can be ploughed back into improving the quality of public transportation.
	The noble Lord, Lord Bradshaw, and the noble Baroness, Lady Scott, asked whether we as a Government can confirm who would be responsible for the preparation of a local transport plan and who would have to be consulted in an integrated transport area and elsewhere. The preparation of a local transport plan would continue to be an obligation of the local transport authority, which is defined in Section 108(4) of the Transport Act 2000. In an integrated transport area it will be for the ITA to prepare the local transport plan, obviously in consultation with constituent metropolitan district councils. In unitary authority areas, such as Brighton and Hove, the duty will continue to fall on the unitary authority. Elsewhere it will be, as now, for county councils to prepare the plan in consultation with the constituent shire and district councils.
	The noble Lord, Lord Bradshaw, asked about the public interest test, quality contract schemes and what the term "economic, efficient and effective" means. The intention is simply to ensure that schemes offer good value for money. That wording is already contained in the existing test that applies to quality contract schemes. Similar wording appears in existing general duties that apply to various authorities under the Local Government Act 1999. The noble Lord, Lord Bradshaw, asked whether the Government will amend Clause 8—that is the duty on local transport authorities to take into account and have regard to government policies and guidance on environmental protection matters. It is implicit in the Bill as drafted that the proposed environmental duty is a statutory minimum requirement. Nothing in Clause 8 or elsewhere precludes local authorities from going beyond what is strictly required by the statutory duty. A local authority will be required to do so as a matter of administrative law where it is a relevant consideration for their deliberations.
	The noble Lord, Lord Bradshaw, and the noble Baroness, Lady Scott, asked who will exercise highway powers in an ITA area. Will it be the ITA or local authorities? Will district councils be able to block proposals such as bus lanes? We would hope that in reviewing transport governance in an area, ITAs and local authorities can reach agreement on how best to ensure effective integration of public transportation and raise issues. It is for them to consider where powers over roads should sit. However, under Clause 75, integrated transport authorities can also be given a power to direct authorities on how the latter exercise their road functions—for example, installing such things as bus lanes, which need longer routes to be effective.
	The noble Lord, Lord Bradshaw, also raised a question about community transport provisions. I am delighted that those provisions were broadly welcomed. I think his point was whether it would be possible for local parishes in rural areas to operate regular bus services—for example, feeder services—to connect villagers to nearby commercial routes and, if so, whether it would be possible for separate fares to be paid by individual passengers. That kind of arrangement is already possible under the existing Section 22 permit regime. The Bill will provide added flexibility, allowing drivers of such services to be paid and, of course, allowing for the use of larger vehicles. Again, that has been broadly welcomed. Individual passengers would need to pay separate fares and we do not see any particular obstacle to that in the legislation.
	The noble Lord also asked about private hire vehicle operators choosing to run local bus services under the taxi/bus provisions in the Bill. I think the noble Lord wanted to know whether they would have to register the details with the traffic commissioners and whether tests on drivers and their vehicles would be as stringent as those faced by bus operators. Where a private hire vehicle licence holder wanted to operate a local bus service under the taxi/bus proposals, they would have to register the details of the services with the traffic commissioner like any other operator. Of course, they would be subject to the same penalties as other operators.
	In common with other noble Lords, the noble Lord, Lord Bradshaw, was concerned about aspects of the traffic commissioner regime and how the commissioners will exercise discretion over bus registration. As a general rule, that would be a very radical step and it would be strongly opposed by operators. However, for quality partnership schemes, the Bill includes a procedure whereby both local authorities and existing local operators can make representations to the traffic commissioners on registration applications. That is contained in Clause 42. The traffic commissioner will then decide whether to accept the registration, reject it or ask for it to be revised.
	The noble Lord asked who will sit on approval boards for quality contract schemes. The Bill provides that boards should normally be chaired by the traffic commissioner with the most relevant local knowledge. Its other two members would be selected from a panel appointed by the Secretary of State. It is envisaged that they would have specific relevant expertise relating to transport planning and transport economics.
	The noble Lord and the noble Baroness, Lady Scott, made points about the possibility of non-elected members sitting on ITAs. The question was asked about the type of people whom the Government envisage being appointed, who would make those appointments, how many there would be and what arrangements would be in place for voting on financial matters. Clause 72 requires that a majority of members of each ITA will be elected representatives of the county, unitary or district councils making up the ITA area. However, the Bill provides flexibility for each area to propose, if they wish, that membership of the ITA should be broadened to represent other interests or to bring in wider experience to the authority. We heard from a number of noble Lords about the value of broadening that experience; the noble Lord, Lord Smith, said the value of consultation with chambers of commerce was of particular importance. The ITA could also include representatives of transport user bodies, environmental groups, Network Rail or, indeed, the Highways Agency; but it would be for the authorities carrying out a review of governance arrangements to make proposals as to how many people would sit on the ITA, what bodies they would represent and what voting rights they would have.
	The noble Lord, Lord Cameron, made a number of points about ensuring that rural communities were properly recognised. The Bill deliberately provides a range of options, particularly on bus services, for local authorities across the country, reflecting the diversity of local circumstances. The work of the bus policy review in preparation for the Bill looked closely at city, small urban and rural services, and our proposals attempt to respond to concerns raised across the country. We believe that those services will deliver real benefits for all sorts of areas, too. For example, measures to support stronger partnership working would be beneficial in rural as well as in urban areas, and proposals to strengthen punctuality regimes would have a universal benefit and, I would strongly argue, be of benefit to rural bus users. Community transport providers and taxi buses—the noble Duke, the Duke of Montrose, referred to post buses and so on—are an important part of the transport system in rural areas, with potential for further development. The Bill offers improvements to encourage those sectors.
	The noble Lord, Lord Cameron, made some points about the need for greater flexibility in terms of design. We agree with that and we want to see the boundaries of ITAs working well in rural areas so that they can have a powerful input into the development of rural services.
	Before I sit down, I want in particular to deal with the points made by the noble Lord, Lord Rosser, about the quality contract schemes. There was a discussion about the lengthy approval procedure. We believe that the regimes that we have set out could have a big impact on bus services, so it is important that an independent assessor is involved and that operators' rights are not trampled on without good reason. The approvals process should help to gain acceptance for schemes and reduce the likelihood of those schemes being taken through lengthy court procedures.
	We have of course heard the calls for greater clarity on the application of TUPE in relation to quality contract schemes. It is important that the workforce involved in the transition to quality contract regimes have assurances. We do not want uncertainty, so the Bill includes a provision to ensure that the provisions of TUPE regulations will apply when a new employer takes on staff from an existing operator as a result of a quality contract. Broadly speaking, the effect of the provisions is to ensure continuity of employment and of the terms and conditions of employees transferred from one operator to another when a new quality contract is put in place.
	I have raced through as many of the questions as I possibly can. I realise that I have not dealt with the Welsh question. All that I can say of value on that at this stage is that the Welsh provisions were put in place very much at the behest of the Welsh Assembly. We aim to work very closely with Assembly Members in putting this legislation together.
	I could go on for a great deal longer on all of the questions raised, but I have a feeling that noble Lords opposite might begin to balk at that suggestion. Again, I thank everyone involved in this debate. I will ensure that a full compendium of questions is put together with answers supplied and I shall be more than happy to circulate that letter and correspondence to all noble Lords who have taken part. I am greatly looking forward to Grand Committee because I think we can have interesting discussions. I see the noble Baroness, Lady Noakes, nodding in agreement—or I thought she was—although I doubt that she will be there because her eyes will be on other matters. I welcome the support for the Bill and I am looking forward to constructive debate and dialogue—and I am certainly looking forward to Grand Committee.
	On Question, Bill read a second time, and committed to a Grand Committee.

Pre-Budget Report 2007

Lord Davies of Oldham: rose to move, That this House takes note with approval of the Government's assessment as set out in the Pre-Budget Report 2007 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.

Lord Davies of Oldham: My Lords, each year the Government report information to the Commission on the economic and budgetary position and our main economic policy measures. By formally sharing information from the Pre-Budget Report with our European partners, we can help to ensure a proper, accurate and effective EU system and meet our commitments, contributing to enhanced employment and growth. This information was set out in the Pre-Budget Report last month and this material forms the basis of what we are sending to the Commission.
	The background to this year's report and spending review is a time of increased international economic uncertainty and a more fragile global environment, which has already seen turbulence in America, Asia and Europe. As the Chancellor set out in his speech on 9 October, provided that we maintain the course for economic stability that we have set, we can respond to this global environment. We will do so by taking no risks with stability and no risks with unaffordable promises that put public finances at risk.
	The full impact from turbulence in the international financial markets is as yet unclear, but the IMF has said that this international uncertainty will have an effect on growth right across the world. Independent forecasters expect growth next year in America and the euro area to fall to 2 and 2.5 per cent. In these circumstances, it is right that we, too, should be cautious. The forecast for growth next year is also of 2 to 2.5 per cent. However, because of the strength of our economy, our commitment to openness and liberalised trade across the world and our flexibility and dynamism here at home, the forecast for growth in 2009 and 2010 is 2.5 to 3 per cent, in line with the economy's trend rate of growth and in line with the forecast in the Budget.
	Against the backdrop of recent events, in the UK decisive action has brought inflation down to around our target of 2 per cent, with it forecast to be on target next year and the year after, employment is at a record level and productivity is growing strongly, up 2.7 per cent in the past year. While growth in America this year is expected to be 2.1 per cent, in Japan 2 per cent and in the euro area 2.6 per cent, in Britain—with exports and investment rising—growth is expected to be 3 per cent. Britain is the fastest-growing advanced major economy in the world.
	The strength of the UK economy is the direct result of the monetary and fiscal policy framework that we have introduced. This Government's monetary policy framework seeks to ensure low and stable inflation. The framework has delivered the longest period of low and stable inflation since the 1960s, along with low interest rates. This has provided the platform for record employment levels, higher investment and economic growth.
	Our two fiscal rules are, first, the golden rule that, over the economic cycle, the Government will borrow only to invest and not to fund current spending and, secondly, the sustainable investment rule that net debt should be held over the economic cycle at a stable and prudent level. We are meeting our first fiscal rule, with the current budget in surplus over the cycle. In the last economic cycle—1986 to 1997—that rule was missed, with a deficit of £240 billion. Over this cycle, with a current budget deficit last year lower than forecast, we have a surplus of £18 billion and are, therefore, meeting our first fiscal rule. We will also meet our second rule that net debt should be at a sustainable level. In America, debt is 44 per cent; it is 49 per cent across the euro area, 86 per cent in Japan and 94 per cent in Italy. In Britain, debt is 37.6 per cent this year and below 40 per cent in every year of the projection period, so we are meeting our second fiscal rule. Debt interest was 3.5 per cent of national income in 1997. Next year, it is expected to be just 2 per cent. That low debt allows more investment in front-line services.
	We can afford sustained investment in our priorities only because of our two fiscal rules, which ensure sound public finances. The rules have protected an historically unprecedented increase in public net investment, while debt and borrowing remain low and stable. Last year, borrowing was 2.3 per cent of national income—£4 billion less than forecast. Over the 10 years of this economic cycle, borrowing and debt in Britain have been lower than in Japan, the euro area, America and the OECD as a whole. Net borrowing is forecast to fall from 2.7 per cent this year to 1.3 per cent in 2012, compared to a peak in 1993 of almost 8 per cent—the equivalent of about £110 billion today. The UK also continues to meet the reference value on the treaty deficit throughout the projection period, with the deficit reaching 1.6 per cent of GDP by 2012-13.
	The projections that the Chancellor set out are also consistent with the Government's prudent interpretation of the stability and growth pact. A prudent interpretation takes account of country-specific factors including the long-term sustainability of the public finances, the economic cycle and the important role of public investment. The reforms to the stability and growth pact agreed in March 2005 rightly place a greater focus on the avoidance of pro-cyclical policies and on reducing and maintaining low debt, with the flexibility for low-debt countries, such as the UK, to invest in the provision of public services.
	The challenges of the decade ahead require a balance to be struck between delivering further investment in public services to equip the country for change and entrenching the macroeconomic stability that is essential in the increasingly global competitive economy. Therefore, the spending review is tighter for many departments and the Government remain committed to ensuring that public spending delivers the public's priorities and value for money for the taxpayer. The spending review has identified substantial savings that can be made by departments. The resources released through the ambitious value-for-money programme, together with the increased spending delivered in the Comprehensive Spending Review, will enable the Government to sustain the pace of improvement in public services and focus additional resources on their long-term priorities. That will be matched with reform and clear objectives set out in new public service agreements defining the Government's top 30 priorities for the coming period.
	The key priorities are, first, to meet the challenge of globalisation by investing in the human and physical capital that will keep the UK economy competitive over the long term, with education spending in England growing by 2.8 per cent a year in real terms, investment in science and university research rising to over £6 billion a year in three years' time and transport investment doubling to £14.5 billion a year by 2011-12. The second priority is to make the UK a better place to live by continuing to improve the NHS, with investment in health in England rising from £90 billion this year to a total of £110 billion in 2010, and by progressing towards the Government's objective of decent and affordable housing for all, with total spending on new housing of at least £8 billion over the next three years.
	Thirdly, we intend to protect the nation from external and internal threats, with total spending on counterterrorism and intelligence rising from £2.5 billion in 2007-08 to £3.5 billion in 2010-11; we are also continuing the longest period of sustained real increases in defence expenditure in over 20 years. Fourthly, we intend to tackle climate change and protect the countryside, with Defra's budget to increase to £4 billion by 2010-11 and a new environment transformation fund with a three-year budget of £1.2 billion. Fifthly, we intend to help to tackle international poverty. By growing DfID's budget by 11 per cent a year over the Comprehensive Spending Review period and enabling total UK official development assistance to reach over £9.1 billion a year, we will be on course to meet our European commitment of 0.56 per cent of national income devoted to development aid by 2010, and then to meet our commitment to achieve, for the first time, the long-established United Nations goal of 0.7 per cent, which we intend to reach by 2013.
	Our task is to meet and master the global economic challenge, making the critical decisions to secure Britain's long-term economic future. The Pre-Budget Report drives forward the great economic mission of our time: to meet the global challenge, to unleash the potential of all British people and to deliver security, prosperity and fairness for all. That is the programme set out in the 2007 Pre-Budget Report and Comprehensive Spending Review and that, with the approval of the House, is the basis on which we are sending updated information to the European Commission. I beg to move.
	Moved, That this House takes note with approval of the Government's assessment as set out in the Pre-Budget Report 2007 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.—(Lord Davies of Oldham.)

Lord Marlesford: My Lords, I am not sure whose spirits the noble Lord was whistling such a cheerful tune to keep up—obviously not the packed benches behind him. There are more people on this side. I salute the noble Lord who is loyally going to join in in support of the Minister.
	We have had some good economic news over the past decade or so. I shall pay tribute to that in a moment. One of the big problems is that trust in politicians generally, and I am afraid in this Government in particular, has declined very sharply in recent years. It is declining perhaps more sharply at the moment than at any time since 1997. I will illustrate that at the end of my remarks with one simple example, which we can all take on board. I believe that we are approaching something of a financial crisis for the Government. Growth estimates for next year have had to be reduced sharply to a shaky 2 per cent. As things always take longer when they are moving in a particular direction, I very much doubt whether 2009 will be better than 2008—unlike what the Minister has told us and unlike what the Treasury would like us to believe.
	Tax yields are likely to fall sharply, at least in the short run. The expenditure implications of Northern Rock are unclear, but could be significant in the overall budget arithmetic. The level of debt in the UK is worrying. Over 18 per cent of adults have unsecured debt of more than £10,000. Can the Minster give us what he regards as the key personal debt figures?
	To a Burkeian conservative such as myself, the main role of government should be to protect vulnerable groups from ill treatment or exploitation. In the economic field that obviously covers employees, consumers and investors. I suggest that the Government consider whether new methods are needed to protect borrowers from irresponsible and unscrupulous lenders. In this, I include particularly some bankers, credit card companies, mortgage companies, insurance companies, hire-purchase suppliers and sellers of financial instruments of all sorts. There is clearly scope for the problems of debt and borrowing to enter the school curriculum at an early age. I offer that thought to the Minister and the Government.
	Management of public debt lies at the heart of the Government's economic policies. We should therefore reappraise the two rules which the noble Lord made much of—they are always made much of—and which, since 1997, have governed public finance in Britain: the golden rule and the sustainable investment rule.
	The present Prime Minister has never tired of trumpeting his success with the golden rule, which requires over the economic cycle borrowing only for investment rather than current spending. The sustainable investment rule says that the debt must be kept below 40 per cent of GDP. It is currently some 38 per cent of GDP, which leaves no great margin for error. In fact, it represents a mere £26 billion—the sort of figure, I am afraid, that people have been discussing in the context of Northern Rock alone.
	A really serious question is the extent to which off-balance-sheet liabilities of the Government arise. It is rather curious that at this particular time the same phrases which have become central to the world credit crisis apply to the Government's own finances. The Centre for Policy Studies has estimated that if the public finance initiative liabilities, public sector liabilities and Network Rail debt were included in the debt, it would amount to £1.34 trillion—some 103.5 per cent of GDP, which is roughly the same as in Italy. Do the Government recognise or accept that figure? If not, what figure would they use instead?
	Are the Government worried about the growing rate of inflation? We had 14 successive years in which the inflation rate measured by the RPI did not reach 4 per cent. The situation started to deteriorate in 2006 and, as of now, the RPI is still above 4 per cent. I prefer the old retail prices index, which is how ordinary people observe the pound in their pocket because it includes housing costs. I believe that it is superior to the EU harmonised index of consumer prices introduced in December 2003, which is now targeted by the Bank of England and is currently 2.1 per cent—only half the level of the RPI.
	I should at once give credit where it is due to Mr Blair and his then Chancellor. Fortunately for the country and the Labour Party, they did not seek to reverse the crucial economic reforms introduced under my noble friend Lady Thatcher, who rolled socialism off the political map of Britain. Of course, a touchstone of the new incentive society, on which our economy depends, is the 40 per cent top tax rate, introduced by my noble friend Lord Lawson in his 1988 Budget. That, amazingly, has survived for 20 years.
	But, sadly, in so many other ways the economic policies of the Government are starting to unravel. It is not just the failure to get effective efficiency measures throughout Whitehall. That seems to be going in reverse, and we had an example of it today. It is not just the failure to stem the avalanche of Brussels regulations, always covered with 24-carat gold plate by the ladies and gentlemen in Whitehall, accompanied with a huge rise in British bureaucracy, which itself somewhat masks the true level of unemployment. And it is not just the failure to tackle the wholly unsustainable absurdity of continuing, to this day, to hire civil servants with an inflation-proofed pension at the absurdly young retirement age of 60. Even President Sarkozy is trying to tackle that one, and frankly we know how difficult it is to change anything in France when the mob gets going. The British are much more placid and, had we had real leadership over the question of the retirement age, much progress could have been made. The tax system is getting more and more complicated with well intentioned but inadequately prepared changes, such as those on CGT, announced in the pre-Budget statement. Sadly, the quality of British government is deteriorating.
	Perhaps I may end with an example which I believe exposes our new Prime Minister as both a negotiator and a man of his word. It is his announcement of the raising from £145 to £1,000 of the duty free allowance available to travellers. I shall simply quote from two of Mr Gordon Brown's Budget speeches. On 16 March 2005, to loud cheers, he said:
	"I have today written to the European Commission proposing that the tax-free limit on goods brought into the UK from outside the European Union should rise from £145 to £1,000".—[Official Report, Commons, 16/3/05; col. 264.]—
	The following year, on 22 March 2006, Mr Brown said:
	"Last year, I proposed that the European Union should raise the duty free allowance for bringing goods into this country from outside the EU. This year, the European Commission has proposed to increase it from £145 to £340, but I am submitting proposals today for a further increase to £1,000".—[Official Report, Commons, 22/3/06; col. 297.]
	What is the duty free allowance today, two and a half years after Mr Brown's first announcement and one and a half years after he repeated it? It remains at £145. I hope that a traveller who is challenged for going through the green channel with purchases worth £1,000 has the confidence to reply, "The word of my Chancellor is good enough for me". I just hope that it will be good enough for the courts as well.

Lord Haskel: My Lords, it is not very often that we have a chance to debate Treasury matters, so I thank my noble friend for moving this Motion. Apart from the Minister, all the speakers in this debate spoke last Wednesday and so we may go over some of the same ground, but I am sure that it is ground worth repeating.
	I largely agree with my noble friend's analysis of the economy but I am a little more sanguine than he is about the rate of growth. Since the Pre-Budget Report on 9 October, the clouds on the horizon have perhaps become a little darker, but I certainly do not agree with the description of the economy that we had from the noble Lord, Lord Marlesford. We are not going to slide into financial recession because of problems in the financial sector; the rest of the economy is working. According to the FT/Harris poll yesterday, business is surprisingly optimistic. Yes, credit may be harder to come by but there is life outside the financial services sector, and life outside that sector seems to be going pretty well.
	Last week, I congratulated the Government on maintaining a free and open economy since they came to power more than 10 years ago. Indeed, I think it is one of the triumphs of the Labour Government that they have managed to do this over the entire period that they have been in power. We can maintain a free and open economy only if we stick to the fiscal rules—that is why we have them. The Minister reminded us that, if our budget was not in balance and our debt affordable, there would be the same calls for protectionism that we are beginning to see in the United States and elsewhere. This free and open style of economy has to be supported by a strong monetary and fiscal regime, as described by my noble friend, and we also have to have a high degree of competitiveness.
	In his speech of 9 October, the Chancellor said that our competitiveness—that is, our ability to compete and succeed in this global age—will depend on our continuing investment in the economy. He went on to say that, in today's knowledge economy, this investment is not just in physical capital assets but also in skills, innovation and intellectual property. The Minister reminded us of that and I agree. In a modern knowledge economy as well as investing in buildings and machinery we also have to invest in design, training, branding, responding to customers' needs and all the related software and services. This is how you remain competitive in a modern knowledge economy. With the Pre-Budget Report my right honourable friend the Chancellor published a paper explaining how this kind of intangible investment relates to our competitiveness and productivity and how we actually seem to be doing rather well. I found the paper pretty convincing. The Chancellor is right to promote this kind of knowledge business in the Pre-Budget Report. Good jobs come out of it—jobs that are highly paid with a low carbon footprint and attractive working conditions. Skills training, investment in science and transport and support for local investment and local economic development will all help this kind of economy, as will the 2p reduction in corporation tax for next year.
	Compared with all this support for business, the outcry against the taper relief on capital gains tax seems to me to be out of all proportion. When I started my business, capital gains tax was either 60 or 80 per cent. It was such a long time ago I cannot remember. People starting up businesses do not think about this sort of thing. People who look upon a business as a financial commodity to be packaged and bought and sold from one to another may take a different view. I hope my noble friend will bear this in mind and not let it distract him. A tax rate for economic stability is what is important for us all.
	There is a distraction but it is not a distraction of tax. The distraction comes from the United Nations Intergovernmental Panel on Climate Change and its meeting in Valencia. The panel tells us that the climate is changing more rapidly than we thought. There was practically unanimous agreement that the change was man-made but it agrees with the Stern report that there is still time to do something about it.
	The Minister spoke about investing in the environment. This means less time to spread out our investment. If we accept what the Joint Committee on the Draft Climate Change Bill said, there would be less time to spread out investment in flood defences, in carbon capture and storage, in the next generation of cleaner cars and in cleaner energy. It means bringing forward the rise in the climate change levy and reducing VAT on energy-efficient products. It means expanding the European Emissions Trading Scheme more quickly to other organisations on the ground and in the air. I wonder if the Minister has given any thought to this. If the realities of climate change demand more of our budget in the near future, how will this activity affect economic stability? If the environment becomes more of an economic imperative, what will be the social effects? What will be the budgetary effects? These are the kind of questions my noble friend will have to address between now and the Budget next April.

Lord Northbrook: My Lords, each year Section 5 of the European Communities (Amendment) Act 1993 requires Her Majesty's Government to report to Parliament for its approval on an assessment of the medium-term economic and budgetary position in relation to public investment expenditure and the social, economic and environmental goals set out in Article 2. This report will form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Articles 103 and 104C. These responsibilities relate first to broad economic policy guidelines, secondly to convergence and stability programmes and thirdly to excessive deficit procedures. The objective here is to ensure that the economic policies of the member states are consistent with the terms of the treaty, including non-inflationary economic growth, a high level of employment and social protection, and better living standards.
	The first of the three responsibilities I will look at in detail is that relating to broad economic policy guidelines. The UK's public finances, as the Minister said, are governed by two overall rules. The first is the golden rule which states that over the economic cycle the Government will borrow only to invest and not to finance current spending. This rule was just met over the last economic cycle. However, its credibility has been severely damaged because the Chancellor has changed either the start or the end date of the economic cycle no fewer than three times. After surveying academics and city economists the Financial Times concluded:
	"Almost none use the Chancellor's fiscal rules any more as an indication of the health of the public finances".
	The second overall rule referred to by the Minister was the sustainable investment rule. This states that the debt ratio must be kept below 40 per cent of the GDP ceiling. The 2007 PBR shows that over the next few years the public sector net deficit keeps within the limit. However, as the noble Lord, Lord Marlesford, has already stated, the Government's figures exclude Network Rail, the private finance initiative and public sector pension liabilities. Does the Minister agree that if you take all these into account Government debt would be well over 40 per cent? Does he also agree with the Centre for Policy Studies' paper of September 2007 which says that if you include all these government debt would be £1.34 trillion, equivalent to 103.5 per cent of UK GDP?
	The second of the three responsibilities relates to convergence and stability programmes. Despite steady economic growth, UK productivity continues to lag behind many of its EU counterparts. According to the ONS 2006 international comparison of productivity, Britain's impressive economic growth over the past decade has unfortunately been fuelled by substantial growth in government and consumer debt. In 1996 net public sector debt was £343 billion. By September 2007 it had reached the staggering figure of £516.9 billion. Total UK personal debt has also tripled since 1993 from £400 billion to £1,380 billion and in the past 12 months growth has been 10 per cent. The PBR total borrowing forecast for this financial year alone is predicted to be £4 billion higher than predicted in the Budget. Government borrowing over the next five years is expected to increase by £16 billion more than predicted at the time of the Budget.
	The third responsibility I will discuss relates to the excessive deficits procedure. Under the stability and growth pact all EU countries must ensure that their government borrowing is less than 3 per cent of GDP. According to the OECD, the UK Government have the largest structural budget deficit of the 15 members to have joined the European Union before 2004. According to the IFS, after a decade of Labour Government the UK still has a relatively big structural deficit by international standards and remains mid-table when comparing the size of government debt across countries.
	I will now look at the UK's performance against the terms of the treaty. First, have we achieved non-inflationary economic growth? ONS figures show that inflation was kept well in check in Labour's first and second terms but, as my noble friend Lord Marlesford has already noted, since 2006 it has generally been on a rising trend. Last week's October inflation figures showed that the CPI had increased above its target from 1.8 to 2.1 per cent, thus exceeding the Government's 2 per cent target. The RPI had accelerated from 3.9 to 4.2 per cent. Can the Minister explain why the Government's preferred index of inflation is half the old preferred measure? Does he not believe that the RPI represents a better measure of inflation? Also, does he agree that it is going to be very difficult to make the public sector accept 2 per cent pay rises when the real rate of inflation is over 4 per cent?
	The 2008 growth forecast in the PBR has been reduced from 2.5 to 2 per cent; I question the figure mentioned of 2.5 to 3 per cent for 2009. Given that the economy is so reliant on financial services—which are estimated to provide 30 per cent of taxes paid by the financial sector, according to Richard Jeffrey of Ingenious Securities—the current sub-prime crisis could mean that even 2 per cent growth is too high. Here I am much more cautious than the noble Lord, Lord Haskel; the problem could well continue for some time. I therefore ask the Minister if he believes that the sub-prime crisis is only temporary, or if he believes that, partly due to it, the UK is now entering a period of stagflation, where we have stagnant economic growth with continuing inflation.
	I am not an economist, but I can see the trend of higher commodity prices continuing, as evidenced by higher oil and food prices. It also seems to me that we have been bailed out on the inflation front for several years by the disinflationary impact of China and the import of cheaper European labour, both of which may be becoming less significant. I note that Chinese inflation has recently been on a strong upward trend. The Chinese October inflation figure was 6.5 per cent, the highest rate since 1996. Why is that important? It is important because our low inflation in recent years has been helped by the cheap price of imported goods, many of which have been made in China. If Chinese inflation keeps going up, its workers will want higher wages and that will make China's exported goods to us more expensive and thus contribute to our inflation.
	Thus, particularly in the past year, we are failing in the goal of non-inflationary growth. Have we achieved the second goal of the treaty, a high level of employment and social protection? The employment level reached 74.4 per cent in the three months to September, below the Government's 80 per cent target. However, within the employment total, the number of Britons in work has fallen sharply over the past two years. An estimated 540,000 foreigners have found work in the UK in the past 18 months but, at the same time, the indigenous workforce has shrunk by 270,000. Does the Minister agree that the problem of the indigenous workforce needs to be looked at much more carefully?
	On social protection, a UNICEF report published in February 2007, An overview of child well-being in rich countries, brought together comparative research on the material, educational and emotional state of childhood in 21 developed nations. Britain came bottom of the list overall. Particularly depressing was the view that British children have the highest rate of underage drinking and teenage pregnancy. Does the Minister agree with the UNICEF report? What action should be taken, and should it be by government?
	The final goal of the treaty is better living standards. Several recent reports show this not to have been achieved. In March 2007, the IFS calculated that absolute poverty rose in the UK in 2005-06, child poverty rose by 100,000 before housing costs to 2.8 million, and 200,000 after housing costs to 3.8 million in the same year. Between 1996-97 and 2004-05 the number of people living in severe poverty increased by 410,000 before housing costs. Excluding bonuses, incomes have fallen for every month in 2007. Research from the Institute for Fiscal Studies shows that, since 1997, the tax burden has increased by £1,300 for every family in the UK.
	I am tempted this year to resist the Motion due to the uncertainty of government finances, with off-balance-sheet liabilities and now the Northern Rock situation. I will return to the issue next year.

Lord Newby: My Lords, it must be a pleasure for the Minister to be able to introduce a broad policy debate such as this, compared with dealing with the travails of Northern Rock and the incompetence of HM Revenue and Customs. I congratulate him on the gusto with which he did so.
	I alone of the speakers in today's debate did not participate in last Wednesday's debate, so, whether or not other noble Lords agree with what I say, they will not have heard it before—at least, not within the past week. The starting point of the Pre-Budget Report is, of course, the outlook for growth. The report forecasts that growth will fall from more than 3 per cent this year to between 2 and 2.5 per cent next year. This is already looking rather optimistic. The Bank of England is now predicting growth of no more than 2 per cent, and the governor has identified a number of risks which might undermine even this figure. The most serious he described as:
	"Further tightening of credit conditions and disturbances in financial markets".
	Whether these risks materialise will crucially depend on developments in the US economy. Earlier in the autumn, Alan Greenspan said that the likelihood of a recession in the US was approaching 50 per cent and described the financial markets there as moving from euphoria to panic with barely a pause for breath, a process which I suspect we also recognise here. The US faces the twin problems of a credit crisis brought about by reckless lending to the sub-prime market and a balance of payments imbalance which is only sustainable so long as the US can finance it through the sale of government bonds. Faced with a weakening dollar, it is increasingly unclear that investors from the Far East will continue to put their money in the US. Only yesterday, the Chinese premier, speaking in Singapore, expressed concern about how to preserve the value of China's reserves, which are largely held in dollars. If the US economy falters, it will undoubtedly be bad news for world growth, not least in China. Here in the UK, it could exacerbate the credit crunch and our own balance of payments deficit.
	Following the Northern Rock débâcle, it is surely inevitable that banks and building societies will in any event be less willing to make risky loans to households, and that such an attitude is likely to extend to businesses with weak balance sheets or risky assets. Like the noble Lord, Lord Marlesford, I have been extremely critical of the banks undertaking risky lending, and such a move to restrict these forms of risky lending will undoubtedly be largely beneficial. More worrying, however, is the decline in the availability of credit more generally, which will slow not only mergers and acquisitions activity, but also investment to good quality projects. The banks and private equity companies are simply facing a credit crunch which will affect all those bodies in which they might otherwise invest.
	As for the balance of payments, the Governor of the Bank of England has recently called for a rebalancing of the economy from consumer spending to exports in an attempt to deal with our long-term, huge balance of payments deficit. That is only possible if we see a fall in the value of sterling vis-à-vis the dollar. Indeed, there now seems to be a consensus among world financial leaders that the level of the dollar is a major problem. That view has been expressed by the leaders in China, the EU and the US itself in recent times, and I wonder whether the Government agree with that assessment. If so, do they plan to press our international partners for discussions that might have some long-term effect on the value of the dollar? I am somewhat sceptical about the efficacy of such discussions, but to the extent that Governments talking up or talking down currencies can be beneficial, now is surely a good time to be talking up the dollar.
	Within the overall economic outlook the situation facing many individuals is increasingly grim. They face a squeeze on their real income brought about by the increased level of taxes, about which the noble Lord, Lord Northbrook, has just spoken, and by RPI growth, which is above earnings growth in many cases, with food and fuel rising quite steeply. In both those cases, and particularly in the case of food, I suspect that prices will continue to rise, and they are certainly unlikely to diminish in the short, medium or long term. People are also, in many cases, facing higher mortgage rates, particularly those whose fixed-rate mortgages are coming to an end and who are having to remortgage at a higher rate. The likely consequence of all this is that consumer expenditure will fall, as has already been evidenced by a small fall in retail sales last month. There are therefore many uncertainties about the future path for the economy. It is important at this point that the Government should not add to them by dithering, for example, on Northern Rock. I do intend to repeat all the arguments that we debated yesterday on Northern Rock. The only point I would make is that during the course of the day the Northern Rock share price has plummeted further as the market realises what noble Lords on most sides of the House accepted yesterday, which is that Northern Rock has no value but for the support that it is getting from the Government and therefore it would surely be sensible for the Government to recognise that by bringing it into temporary public ownership.
	Moving from the macro economy to the overall fiscal stance, we—and I in particular—remain sceptical about the Government's forecasts. Each year, the Chancellor shows that for each of the following five years there will be a steady, relentless reduction in net borrowing, and each year the figures have to be adjusted upwards. I am afraid that, along with the golden rule, these projections have diminished credibility with each succeeding year. The main excitement generated by the Pre-Budget Report was in relation to the Government's proposals on tax, particularly in relation to the lesser taxes, in terms of revenue at least, capital gains tax and inheritance tax and the position of non-doms. Here I have to acknowledge that George Osborne's speech to the Conservative Party conference on inheritance tax and non-doms had an extraordinary, electrifying effect on the Government. I say the Government rather than the Chancellor because I do not believe that the Government's actions on these two taxes emanated from No. 11 Downing Street, but from No. 10. On inheritance tax, it is surely right to increase the threshold because the tax was increasingly being paid by modest, middle-class families who were benefiting from the recent, very rapid rise in house prices. The main problem now with inheritance tax is that it is still far too easy to evade by the very wealthy who can use expensive tax advisers to minimise their eligibility. I accept that this is an extraordinarily difficult issue to resolve, but as someone who strongly believes in the principle of inheritance tax, I hope very much that he will keep trying.
	On non-doms, we now have a rough-and-ready proposal to ensure that they do at least pay some tax. However, three further measures are needed in relation to non-doms to make the position fairer and less open to abuse. First, they should be required to pay capital gains tax on the sale of their properties in the UK; secondly, there should be a review of the different tax treatment of various forms of investment in the UK and US and amendments to our tax treaty with the US to avoid double taxation; and thirdly, the rules for qualifying for non-dom status should be tightened. I recently met a City banker of Irish extraction who explained to me that although he had lived in the UK all his life and intended to spend his remaining days in the UK, he was now being advised by his accountant that because his father had been born in Ireland he could qualify for non-dom status here. It seems to me that that is not the purpose of having a non-dom rule, and in respect of those who have lived here all their lives with no intention of moving elsewhere, the rules could beneficially be tightened.
	The third contentious tax change was on capital gains tax where taper relief is to be abolished. We support the principle of abolishing taper relief. It gave too great a benefit to those in the private sector who could organise their affairs so as to qualify for it, and I do not simply mean private equity bosses. I do not believe that 18 per cent will prove to be a penal rate, or that it will have a significant, or even discernable, impact on entrepreneurialism in the UK. What I think is sometimes forgotten is that taper relief was the creation of the current Prime Minister. Previous Conservative Governments clearly did not find it necessary.
	Some amendments may be needed to the Government's current bald proposals, and I would mention just two. It is a mistake to reduce capital gains tax on second homes from 24 per cent to 18 per cent. Given the current status of the market in housing, particularly in parts of the country such as Cornwall, any measure that makes the ownership of second homes more attractive seems to me to be mistaken. I also think that there is an argument for a tax-free band for proprietors and working directors on retirement. That existed in the past, and it should be reinstated. On the general principle, I hope that the Government will not succumb to too much industry lobbying to reverse their position on taper relief. The lobbying at the moment reminds me very much of the lobbying on the minimum wage, when the CBI and others argued that the introduction of the minimum wage would lead to at least a quarter of a million job losses. The truth was that it led to no such thing.
	One area of the Government's tax proposals that is extremely unsatisfactory relates to local government finance. The Pre-Budget Report proposes that council tax should continue to rise by 5 per cent per annum. This tax bears particularly hard on low-income families and pensioners. Each passing year without a revaluation creates more anomalies and brings opprobrium on local government that is simply unjustified. I do not expect the Minister to defend council tax—I think the Government have long since stopped attempting that impossible job—but I wish that he would give some encouragement to the thought that the Lyons report might be resuscitated. I think that Jonny Wilkinson would be impressed by the distance that the Government have kicked it into the long grass. Although we do not agree with all of it, that is highly unfortunate.
	On public services, the problem that the Government now face is that there is a gap between the amount of money that has gone in and the public's view of the benefits that have emerged. I do not believe that the way forward or the way in which this will be dealt with is the Government's current approach of seeking major additional so-called savings. The single major reason why increased public expenditure has not produced the results that people expected is that the Government from the centre have been too prescriptive in the way in which they have wished their policies to be implemented, with the result that teachers, nurses and police staff are spending far too much time on the bureaucracy imposed on them from the centre. When someone such as the nurse of the year resigns from the NHS in frustration with the paperwork and the bureaucracy with which she is confronted, it is a telling indictment on the way in which the Government have sought to reform—or, rather, not reform—the public services.
	We are entering a period of uncertainty tinged with apprehension. It will require decisiveness and a sure touch to steer us through it. The Prime Minister was, in one sense, fortunate to leave the Chancellorship when he did. He will not, however, be able to escape the political consequences of the Government's uncertain economic management.

Baroness Noakes: My Lords, we have had a short but very interesting debate and I thank my noble friends for coming out, as the noble Lord, Lord Haskel, pointed out, for the second week running to talk about the economy.
	The Motion refers to the Pre-Budget Report which was announced in another place on 7 October this year. As I said in my speech on the humble Address last week, we on these Benches pressed hard for a debate on the PBR before prorogation but the Government refused. It has not been our custom to require that Budget Statements, Pre-Budget Statements and Comprehensive Spending Reviews are repeated in your Lordships' House. While they are clearly Statements of public importance within the terms of the Companion, they are generally long and often complex and we have judged that the convenience of the House is better served by a debate. But that is predicated on a debate being allowed on a timely basis, which this debate is not. The Government have forced us to re-examine our stance, and we may well in future wish to take such Statements in the House on the same day.
	Once the Government had got past Prorogation and avoided a timely debate on the PBR, they suddenly discovered a passion for a debate on it before the end of this month. But this is only to dance to the tune of an obscure European code of conduct and not because the Government believe that it is important that this part of their policies should be debated in your Lordships' House. We do not believe that this reflects well on the Government's approach to your Lordships' House.
	One of the few benefits of debating the PBR so late is that we have had an opportunity to reflect on the impact that it has had. It was a copycat PBR. Our abiding memory is that it was cobbled together at the last minute in order to launch a general election campaign, which the Prime Minister called off when he saw that his popularity was evaporating as a result of my party's highly successful conference.
	We have heard from a number of sources that the very late decision by the Government—almost certainly in No. 10, as the noble Lord, Lord Newby, said—to introduce additional inheritance tax relief was only because of the outstanding success of the announcement made by my honourable friend Mr George Osborne the previous week. On the other side of the equation, they copied us by tackling the long-running issue of non-doms.
	They also sprang some capital gains tax changes without any consultation. These penalise investment in business and enterprise. I am glad to say that this was all down to the Government; we would not have been so inept.
	The Government's successive forecasts generally show a deteriorating pattern. We were thus not surprised to find in the PBR that the Government would stay longer in budget deficit than in the earlier reports. A return to surplus is now put off until 2009-10. In consequence, the Government will be borrowing more than they previously estimated—£16 billion over the next five years more than the last Budget forecast, to be precise. Net debt as a percentage of GDP rises to nearly 39 per cent, which is within a whisker of the Government's own rule of 40 per cent, as my noble friends Lord Marlesford and Lord Northbrook have already pointed out. As my noble friends have also pointed out, that figure excludes considerable amounts of off-balance-sheet debt and also excludes amounts for unfunded pension liabilities.
	The Government have revised their growth figures down for next year, blaming the turmoil in credit markets. The Bank of England made it clear last week that the UK will see a "sharp slow-down" in 2008 and the detail of the Bank's central forecast suggests growth of only 0.3 per cent in the first two quarters of next year.
	For the first time in a very long time the "R" word has crept back. The noble Lord, Lord Newby, reminded us of Alan Greenspan's comment on the likelihood of a recession in the US. But the Bank of England's chief economist last week said,
	"there's a substantially higher probability of a recession",
	in the UK next year.
	We would not wish on our economy slow or even negative growth coupled with inflation. The big question is whether our economy has real resilience built into it. The Government's policy of high debt and budget deficits may well have left our economy vulnerable to external shocks. We obviously have to ask whether we can actually achieve the PBR's growth forecast of 2 to 2.5 per cent next year, followed by a bounce back to trend the year after.
	As the noble Lord, Lord Newby, has pointed out, household consumption has been a big driver of GDP growth in recent years and there are very significant areas of uncertainty around that. We do not know what path interest rates will take as there may well be inflationary pressures in our economy which could well defer a move in rates downwards and, as a highly indebted nation, interest rates are critical. As we heard earlier, personal debt is now nearly £1.4 trillion, largely secured on property but with a significant unsecured element. Recent surveys suggest that 2.1 million adults are struggling with repayments.
	The Government have often asserted that people save when they feel insecure and they spend when they feel secure. "Oh, people feel good about life under new Labour so they do not bother to save" is a paraphrase of Ministers' responses to our questions about the plummeting savings ratio. The truth is that their spending was holding up economic growth, which the Chancellor rather liked. In the first quarter of this year, the savings ratio fell to 2.1 per cent, the lowest level since 1960. If that ratio starts to swing back to its pre-Labour levels of around 10 per cent, that will suck a considerable amount of spending out of the economy.
	That would add to other strains on household spending capacity. The Government have steadily increased the tax burden since they came to power, often through the use of stealth taxes, and we can see a continuation of this pattern in the Pre-Budget Report, including the rising proportions of income tax and national insurance. The net disposable income of individuals as a percentage of gross income has been falling as a consequence and this seems set to continue.
	To this must be added the undoubted pressures on inflation, with food and fuel prices on an upward trend, as the noble Lord, Lord Newby, pointed out. He also pointed out that wage growth is overall less than RPI at the moment, which means that there is a real squeeze on the value of pay packets. People on very low incomes—for example, a large number of pensioners—experience even higher levels of inflation than the average shown in the RPI and will feel the pinch even harder.
	All of a sudden, an economy constructed on both personal and government debt starts to look problematic. What stress testing of the impact of a further squeeze on household incomes have the Government carried out? If consumer demand, for example, is one percentage point lower than currently forecast, what does the Treasury's model say about corporate profits, and therefore tax receipts, or about the need for additional debt?
	I put some of these questions about falling consumer spending to the Government in the debate on the gracious Speech last week, when the Minister was not with us. The noble Lord, Lord McKenzie of Luton, said:
	"What happens is what is already happening: there is a rebalancing of the economy whereby business investment comes more to the fore".—[Official Report, 14/11/07; col. 565.]
	I sometimes wonder whether Ministers are on the same planet as the rest of us. Business investment is at an all-time low—below 10 per cent of GDP—and the Government's own GDP forecasts show that business investment growth will be lower than in 2006-07.
	Lower consumer spending will provide an unpromising environment for some categories of investment. I ask again: what will happen to our economy if consumer demand falls further than currently forecast or fails to recover as quickly as forecast?
	The Government will be judged on how well they have prepared our economy for rough waters. It does not much matter that the seas are being whipped up by forces outside their control, such as the fall-out from the sub-prime debt crisis. What matters is whether our economy can weather the storm. We have real fears about that.
	Little attention has been paid to the Comprehensive Spending Review. Today's Motion is expressed in terms of the PBR and does not even mention the CSR. Perhaps the Government are not keen on a debate on the CSR, but this appears to be our only opportunity to talk about it.
	Many of the CSR07 settlements had been dribbled out in earlier announcements. We knew that the overall budgetary position made the high spending of recent years impossible, so there was relatively little new to say last month. The big picture is that the Government are planning public spending increases of 2.1 per cent during the next three years, which compare with 4 per cent for the previous nine years. Increases of 2.1 per cent will be below the expected growth in GDP, hence the Government have copied our policies; namely, that expenditure plans should share the proceeds of growth.
	Some departments will get more than 2.1 per cent. For example, the settlement for health is expected to deliver 3.7 per cent. That sounds generous until it is compared with recent years, when the NHS absorbed spending increases of more than 7 per cent per annum. All the scenarios in the Wanless report needed more than 3.7 per cent.
	The big question is whether the CSR07 moneys will be spent any more wisely than any of the previous CSR settlements. We know that public sector efficiency has gone backwards during the years of high spending. We know also that we have not bought enough with the taxpayers' money poured into public services. In education, 40 per cent of 11 year-olds are unable to read, write or add up properly, and only a similar percentage get five good GCSEs. In the NHS, we have frightening levels of hospital- acquired infections; local hospitals are facing increasing threats of closure; and the Government have bungled pay settlements. Our crime rates are among the worst in the world, and rising, with prisons bursting at the seams because of inadequate planning. Despite massive increases in benefits, child poverty has been rising and the Government are missing their targets by miles. We can see nothing in the PBR or CSR which makes us think that money will be spent any better in the future. Indeed, the Prime Minister seems to be leading moves away from public service reform, which might make a difference, back towards the central, stateist policies which have never delivered.
	The Motion before us is that this House "takes note with approval" of the Government's PBR assessment. For these Benches, I am happy to take note of the PBR assessment, but I cannot bring myself to do so "with approval".

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have spoken in this debate. I was grateful for the generous welcome for my presence of the noble Lord, Lord Newby, and even for the rather less enthusiastic welcome from the noble Baroness. I regret that this is not my second debate on the economy and was not able to participate last week, but the noble Baroness will have to reconcile herself to the fact that there is much talent on the Treasury Bench and that many people are eager to participate in the major debates, whereas the Queen's Speech offers only a limited number of opportunities. We were excellently served by my noble friend last week when he summed up the debate. I hope that she will feel that, at this second opportunity, I, too, will respond to the debate as constructively as I am able.
	I rather regret the fact that she regards the debate as not being timely. The straightforward fact is that we are under an obligation to produce a response to Europe by the end of November. Due to our budgetary arrangements, we receive dispensation from time to time to present our report to Europe later than the November deadline, but in circumstances where we have produced our Pre-Budget Report, it would look quite extraordinary if we did not meet our obligations by putting it before both Houses and presenting it to Europe in good time. That is why this debate is taking place now. I hope that the House will recognise that it is an advantage for the Government to be in good standing with Europe by meeting their timetable, not least because the report is a contribution to the overall strategy which the European Union pursues with regard to the economies of the member countries. The more we are able to co-operate in those terms, the better are the returns for the United Kingdom.
	I greatly welcomed the fact that the first contributor to the debate was the noble Lord, Lord Marlesford, who never fails to entertain the House with his insights into the economy. We all know his long record of participation in these economic debates and his distinguished record as an economic commentator before he arrived in this House. He and those on his Benches were perhaps overly pessimistic about the present situation. We must of course counsel some anxiety about international circumstances which present some challenges, but the British economy is strongly positioned to cope with such fluctuations. The noble Lord suggested that one of the great problems was that we have massive public and private debt. He was of course right that individual households have considerable debts—we can gross them up to the figure of £1.4 billion which he mentioned. It is also the case that households have increasing personal assets. The personal assets of households in the United Kingdom have increased by 72 per cent over the past 10 years. We must remember that when we are talking about the difficulties.
	I will not follow the noble Lord, Lord Newby, down the road of discussing Northern Rock. He will forgive me for saying sufficient unto yesterday is the participation thereof. He will also recognise that when we look at the issues with regard to Northern Rock as with household debt we seek to identify those areas that are real securities against those where there is exposure. All I am suggesting to the noble Lord, Lord Marlesford, is that he is probably being somewhat unfair with regard to households when he grosses up personal debt, produces a substantial figure and suggests that that should make our flesh creep.
	With regard to this situation, he generously said that the Government had maintained an income tax rate, which has now obtained over nearly two decades—a consistency that I know he applauds. The noble Lord, Lord Newby, was more explicit in congratulating the Government, but at the same time he will recognise that there is also some advantage in consistency with regard to taxation in respect of business. I know that the noble Lord, Lord Newby, has particular reservations about capital gains tax, but when we came to power, capital gains tax was running at more than twice the level than it is now. There is still a debate to be had about the increase to 18 per cent.
	The noble Lord, Lord Newby, mentioned second home owners, who are the beneficiaries of this and might not be regarded as the most significant people to benefit. We will have a debate on these matters, but it does not alter the fact that when it comes to the issue of taxation with regard to business, the Government have adopted an intelligent and responsible approach. I reassure the noble Lord, Lord Newby, that we will not keel over in the face of industry pressure with regard to our proposals, but we are prepared to listen to the industry and business case. It is only right that a Government who are interested in the prosperity of our enterprise economy should do so. The Chancellor has given enough illustrations of that.
	I was very grateful to my noble friend Lord Haskel; the sole contributor from my own Benches.

A noble Lord: He is in the Chair.

Lord Davies of Oldham: My Lords, I hope that my noble friend will forgive me. I had completely forgotten his elevation at this juncture in the debate so that he is actually presiding over our affairs. In that case, I shall be even more solicitous in praising him for his contribution earlier this evening. He is absolutely right. He identified the strength of the Government's position with regard to the business economy. It is far too easy for others to paint a gloomy picture when a great deal about the real economy is working very constructively indeed. I know that he is well versed and has spoken most recently in debates about the enormously significant role that we are playing in improving the skills agenda, particularly in increasing the role of science in our society and by the work of my noble friend Lord Sainsbury in contributing to the strengthening of our economy against fluctuations that confront us, as undoubtedly they will.
	My noble friend was the only contributor this evening—I stand correction if I am wrong—to introduce that other dimension to which we must all have great regard: climate change. There is no doubt that it presents a significant challenge, but the Government are leading from the front on that issue. The whole House will recognise how much progress we have made with regard to the Kyoto targets, how fertile we are in ideas that promote a low-carbon economy and our intention to lead Europe in those terms. That does not alter the fact that this is a challenging agenda. I accept the point made by my noble friend that there is an element of acceleration in the air because of recent scientific insights beyond the Stern report. We must have due regard to that. It is certainly a challenge to which we need to respond.
	On the question of the public aspect of debt to which the noble Lords, Lord Marlesford and Lord Northbrook, referred, it can sometimes be construed that everything to do with PFI means that you gross up the sums and then dump them on the Exchequer, which then has to respond to the challenge of meeting those costs in any one year. These are long-term projects—in terms of the rewards that they bring to the economy and in terms of the actual costs. Therefore, it is not entirely right that the noble Lord, Lord Marlesford, managed by some rather subtle arithmetic to get our debt burden above and beyond the Italian perspective. I would not accuse the noble Lord of the concept of creative accountancy, but he will nevertheless recognise that the Government beg to differ on those calculations and how we arrive at our overall position on debt.
	The noble Lord, Lord Northbrook, gave a somewhat pessimistic perspective on the economy, although he would no doubt portray it as a realistic one. He is of course right that we have challenging times ahead. None of us can look at aspects of the American economy without recognising that we will have to adjust against that perspective. He first said that he did not like our index on inflation, but it is the international index—a comparator that we have with other countries, which therefore makes comparison with us internationally valid. He will also recognise the difficulty with the other measure of inflation; every time the Bank of England puts up interest rates in order to manage the economy, it automatically pushes up inflation because the other measure of that is the mortgage rate built into its actual index. Now, that is a real weakness of that other index, but while one must have due regard for the burdens that households have to bear when people pay mortgages on their housing, I assure him that when the Government use their index of inflation it is for the best reasons of international comparison. I hope that the noble Lord will accept that dimension.

Baroness Noakes: My Lords, the Minister makes a stout defence of the use of CPI as the Government's favoured measure, but said that it excluded certain items that are within the ordinary costs of individuals. Can he explain why the Government used that measure in their wage discussions with public sector employees?

Lord Davies of Oldham: Well, my Lords, we have one measure of inflation, which is the standard for the nation. I understand the enormous enthusiasm that the noble Baroness is presenting for the low paid worker, although—as with that enormous concern for pensioners and others with low incomes to whom she also referred—it was conspicuously absent when her party was in power. That is in the wake of the fact that her proudest boast this evening is that the Conservatives have introduced a proposal for helping millionaires with their taxation position. The noble Baroness cannot, on the one hand, boast of her wonderful achievement on that issue but, on the other hand, say that the Conservatives' real interests are others in the economy whom they consider equally deserving.

Lord Northbrook: My Lords, my point was: how can public sector employees be expected to be bound by the CPI when their cost of living is based on the RPI? It is difficult for them to accept 2 per cent pay increases when their rate of inflation is over 4 per cent, and could be more.

Lord Davies of Oldham: My Lords, those figures are of course those of the noble Lord and not the Government. However, we clearly stressed to public sector workers that—as the noble Lord will recognise—there is a trade-off between the people employed in the public sector, the investment that we are able to make there, and the amount that we are able to pay public sector workers. His noble friend referred to that when, in glancing at the National Health Service budget, she grudgingly recognised the enormous advances that the Government have made. The noble Baroness probably did not cover the last decade because she was grudging about the reduction in its present position as opposed to that of previous years.
	Now, there is a fine analysis: a party that could not conceivably have matched the investment that we have made in the National Health Service regrets that we are reducing somewhat on the very substantial inputs that we have made over more than half a decade, and laments it while, at the same time, talking of bungled pay arrangements. I presume that what the noble Baroness meant is that some workers in the National Health Service got more than they actually deserved. The noble Lord is now berating me because he thinks that they are not getting enough. Well, such are the contradictions in some of the representations made this evening, but we are to expect that. One of the glories of the Opposition is that they can throw challenges or criticism at the Government without necessarily sustaining a narrative that itself stands up as coherent economic policy.
	In this debate we have been concerned to present what represents, in fact, a very strong position for the British economy. I do not accept the excessive degree of pessimism that is being expressed about the immediate future. However, I accept the warnings that are being issued that the international economic climate will not be as benign as it has been in the recent past. That is certainly so. But, as the noble Baroness asked herself when she made her contribution, the question is whether the economy is in a position strong and resilient enough to meet the challenges that lie ahead. If we look at all the international comparators, we can see that we are in a strong position. Does that mean that we can expect to have the same rates of growth next year and the year after that as we have enjoyed in recent years? No—that is why we have scaled down projected rates of growth. We have taken into account the fact that the international climate is more challenging. What we are sure of is that we can present to the European Community a management of the economy which shows how judicious and intelligent investment in public services, born of taxation that is well judged to encourage the enterprise part of the economy, has resulted in circumstances in which the Government can put their case with confidence.

On Question, Motion agreed to.
	House adjourned at 8.32 pm.